Pfizer
Why are investors shorting Pfizer?
It’s been quite the turnaround for Pfizer Inc. (NYSE:PFE), which last month was the third least short-sold company out of the Dow’s 30 components and is now the fourth most short-sold. I can only assume the big surge in short shares has to do with two factors. First, the company is in the midst of dealing with a steep patent cliff. It lost the previous best-selling drug in the world, Lipitor, to patent expiration in 2011, and will lose blockbuster Celebrex in 2015. Secondly, with many shareholders tendering their Pfizer shares for the animal health segment spinoff Zoetis investors are concerned that without the slow but steady growth of Zoetis Pfizer’s bottom line may suffer.
Is this short interest warranted?
Even though Zoetis is one of my favorite animal health companies, it accounted for less than 8% of Pfizer Inc. (NYSE:PFE)’s total revenue, so it shouldn’t be a terribly big loss. The key for Pfizer to be successful moving forward will be how many new blockbusters it can bring to market. Blood thinner Eliquis, which was co-developed with Bristol-Myers Squibb and approved in December, could deliver up to $5 billion in peak sales which is a nice start, but it’ll definitely need consistent wins if it hopes to maintain its current valuation given the upcoming loss of Celebrex.
DuPont
Why are investors shorting E I Du Pont De Nemours And Co (NYSE:DD)?
As we’ve witnessed in previous months, DuPont continues to cling to the No. 5 spot in terms of shares held short as a percentage of outstanding shares. DuPont is really a global macroeconomic play, servicing the chemicals and agricultural industry, so tempered growth worldwide will lead to weak bottom line growth for DuPont. Given Europe’s ongoing troubles and the slowdown in China, it’s pretty easy to understand why short-sellers are building a wall of worry around E I Du Pont De Nemours And Co (NYSE:DD).
Is this short interest warranted?
DuPont’s future is intricately tied to the health of the economy, so it really just depends where we head next. At the moment, the threat of a credit crunch in China, ongoing austerity in Europe, and the prospect of a paring back in QE3, presents a situation that would definitely favor the pessimists. My suggestion would be to wait for DuPont to provide its remainder of the year forecast to get a better sense of where it may be headed next before making the leap in either direction.
Which most hated Dow stock do you think has the greatest chance of bucking the pessimism? Share your thoughts in the comments section below.
The article The Dow’s 5 Most Hated Stocks originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends, Intel.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
