It was truly an amazing first quarter for the Dow Jones Industrial Average (INDEXDJX:.DJI). The U.S. markets’ oldest continuing index gained 11.3% for the quarter and set multiple all-time record highs.
As you might expect, when the market has such a rapid run higher, investors can get quite skeptical. This is why I examined the five most hated Dow components from a short interest perspective last week. Some I proposed have been unfairly bet against, while pessimists in other Dow components have every reason to be skeptical. Today, I suggest we turn the tables and look at the Dow’s least short-sold, and thus most-loved, companies.
| Company | Short Interest as a % of Shares Outstanding |
|---|---|
| Coca-Cola (NYSE:KO) | 0.77% |
| General Electric (NYSE:GE) | 0.84% |
| Merck (NYSE:MRK) | 0.87% |
| ExxonMobil | 0.90% |
| Procter & Gamble (NYSE:PG) | 0.91% |
Source: S&P Capital IQ.
Just as we did last week, we’ll first take a look at why short-sellers might be avoiding these five names and then pass judgment on whether investors have anything to worry about.
The Coca-Cola Company (NYSE:KO)
Why are short-sellers avoiding The Coca-Cola Company (NYSE:KO)?
It really shouldn’t come as a shock to anyone that The Coca-Cola Company (NYSE:KO) is the least short-sold component of the Dow 30, as it’s the most valuable brand name in the world, according to research firm Interbrand. Operating in all but two countries worldwide, The Coca-Cola Company (NYSE:KO) holds 15 of the 33 biggest revenue-generating non-alcoholic beverage lines in its portfolio of drinks.
Do investors have a reason to worry?
Absolutely not! The Coca-Cola Company (NYSE:KO) has a 51-year streak of raising its dividend and also has the global diversity and product line to survive any economic downturns without much pain. About the only true concerns The Coca-Cola Company (NYSE:KO) investors need to keep their eyes on are rapidly rising food costs (i.e., sugar), and unfavorable currency translations overseas, which can reduce Coke’s bottom-line profits.
General Electric Company (NYSE:GE)
Why are short-sellers avoiding General Electric Company (NYSE:GE)?
Some companies are still recovering from the financial crisis of 2008-2009, but General Electric Company (NYSE:GE)’s recovery is well under way. In its fourth-quarter results, it announced a record $210 billion backlog, delivered 8% organic industrial growth, and demonstrated continued health in its GE Capital financial arm, whose tier 1 common ratio rose to 10.2%. In addition, General Electric Company (NYSE:GE)’s plans to split up its energy business into three segments have investors excited that shareholder value will soon be unlocked.
Do investors have a reason to worry?
Short-sellers probably have very little control over General Electric Company (NYSE:GE) until it splits up its energy business. Organic growth in nearly all segments has been far too strong to continue to bet against General Electric Company (NYSE:GE), and its dividend growth since it slashed its payout during the recession has also been phenomenal. There are still plenty of reasons to like GE here.
