Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



5 Dow Stocks Short-Sellers Are Too Scared to Bet Against

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

The 30 stocks in the Dow Jones Industrials (DJINDICES: ^DJI  ) are all well-regarded companies with fine reputations, but after a strong five-year run, the Dow's recent turbulence has many short-sellers thinking that they can make money betting on a downturn. Yet those short-sellers aren't confident that all of the Dow 30 will drop, as they've shied away from betting against several stocks. Among them are consumer giants Procter & Gamble (NYSE: PG  ) and Nike (NYSE: NKE  ) , which many see as defensive stocks that can rely on their valuable brand names in any economic environment. But also among the least popular short-sale candidates are industrial giants General Electric (NYSE: GE  ) and United Technologies, as well as big-oil stalwart Chevron (NYSE: CVX  ) . None of these stocks has more than three-quarters of a percent of their outstanding shares sold short right now.

It's not valuation
Interestingly, among these five stocks, only Chevron has a particularly low earnings multiple. Short-sellers often avoid cheaply valued stocks because they don't necessarily have much further to fall, and if a value stock suddenly comes into vogue, it can jump quickly and cause big losses for short-sellers. Chevron does have the challenge of finding ways to grow in an industry with stagnant prices lately and the challenges of keeping oil and gas production levels up, but with a relatively high dividend yield, Chevron also poses a problem for short-sellers who want to avoid high carrying costs for their short positions.

Yet for the other stocks, valuations aren't particularly low. Procter & Gamble and Nike actually sport fairly high valuations, reflecting the perception that they'll be less likely to drop significantly as other Dow stocks in the event of a downturn. Nike's impressive growth rates arguably justify its premium share price better than P&G's more challenging situation. But both companies have invested billions in building up their respective brands, and both expect to use those brands to keep their profits up and establish a growing presence throughout the world as millions of consumers ascend to middle-class status internationally.

Full steam ahead
Meanwhile, the industrial sector has been firing on all cylinders recently, and that has helped to propel both General Electric and United Technologies to impressive returns. Both GE and United Tech have exposure to the booming commercial aircraft industry, with both companies supplying Boeing with essential components for a wide range of airplane models that the aerospace giant sells.

Yet both companies also have other exposure to the industrial economy, and in both cases, their other divisions have helped contribute to profits. GE's has made a huge foray into the energy segment, bolstering its alternative-energy offerings like wind turbines with conventional oil and gas services to create a budding energy empire. United Technologies has its elevator and commercial HVAC businesses to support the conglomerate's overall revenue and earnings. Unless the somewhat troubling economic reports we've seen in the past couple of weeks turn into signs of a longer-term downturn, short-sellers could well remain reluctant to bet on an imminent reversal of fortune for United Technologies or GE.

No guarantee ...
Of course, just because short-sellers aren't targeting a stock doesn't mean it can't drop. But if those who bet against stocks for a living don't think a certain stock is worth the risk, it could point to better results for those willing to buy shares.

... but you should still invest
Despite having no guarantee, your odds of getting rich are better if you invest in your future. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2831083, ~/Articles/ArticleHandler.aspx, 8/28/2015 9:28:59 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 12 hours ago Sponsored by:
DOW 16,654.77 369.26 0.00%
S&P 500 1,987.66 47.15 0.00%
NASD 4,812.71 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 4:35 PM
^DJI $16654.77 Up +369.26 +0.00%
CVX $77.64 Up +4.55 +0.00%
Chevron CAPS Rating: ****
GE $25.01 Up +1.00 +0.00%
General Electric C… CAPS Rating: ****
NKE $112.62 Up +3.86 +0.00%
Nike CAPS Rating: *****
PG $71.48 Up +0.58 +0.00%
Procter & Gamble CAPS Rating: ****