Do investors have a reason to worry?
Although Wal-Mart Stores, Inc. (NYSE:WMT) is a retail kingpin, I’d certainly say there are some concerns on my mind, based on two earnings warnings this year alone. Consumer spending is still relatively weak, which has made it difficult for Wal-Mart to move higher-margin discretionary items. Also, Wal-Mart was hurt earlier in the year by delayed tax refunds stemming from the IRS cost-saving furloughs. Based on the IRS’s guidelines last week that it wouldn’t go after citizens who fail to get health insurance under Obamacare but would garnish their refund should they be due one, I have to wonder whether this may not be another earnings warning in disguise for Wal-Mart come tax time next year and in 2015. While Wal-Mart Stores, Inc. (NYSE:WMT) is probably a safe bet for the long run, it could encounter quite a few bumps over the coming year or two.
General Electric
Why are short-sellers avoiding General Electric Company (NYSE:GE)?
Whereas The Coca-Cola Company (NYSE:KO) is diversified globally, GE is diversified horizontally across a number of different industries. GE has a financial arm, a big presence in the energy industry, the transportation industry, and even the health-care sector. While not as diversified as, say, Berkshire Hathaway, GE’s cluster of business segments gives it stability should one segment run into hard times. Another factor keeping short-sellers away is that GE’s dividend is growing once again. High yields often keep pessimists at bay because short-sellers are on the hook for paying their portion of the dividend for borrowing against a stock. With GE sporting a yield in excess of 3%, few short-sellers are willing to take that bet and risk having to pay a dividend out of their own pocket.
Do investors have a reason to worry?
The biggest concern for shareholders had been in shoring up capital in its GE Capital arm and in winding down its toxic asset portfolio. Both are moving along smoothly, and GE is looking as if it’ll see steady mid- to high-single-digit growth from its energy management and oil and gas segments for years to come as the Obama administration pushes to expand domestic energy production and improve alternative energy strategies. With GE’s dividend heading higher once again, I see no reason why short-sellers should be piling into this stock.
Source: Microsoft Sweden, Flickr.
Microsoft
Why are short-sellers avoiding Microsoft Corporation (NASDAQ:MSFT)?
Microsoft Corporation (NASDAQ:MSFT) may not be lighting it up with successful new devices, but it has one of the greatest legacy products of all-time to fall back on: its Windows operating system. For the year, Microsoft’s Windows division delivered 5% sales growth and points to its ongoing dominance in PC and certain mobile operating systems. In the near term, the long-awaited debut of the Xbox One gaming console should also help buoy the company’s top and bottom line results. With the company’s low beta and roughly $60 billion in net cash, short-sellers are doing their best to keep their distance.
Do investors have a reason to worry?
Despite Microsoft Corporation (NASDAQ:MSFT)’s relatively steady results, there are quite a few challenges and question marks lined up over the near term. With CEO Steve Ballmer announcing that he’ll retire within the next 12 months, no one is quite certain who will succeed him at the helm. Some, of course, will be thrilled to see Ballmer gone, given Microsoft’s multiple failed innovations over the past decade, but it will nonetheless create an even greater cloud of uncertainty as to where Microsoft will head next. The other concern is whether the release of the Xbox One will be a “buy the rumor, sell the news” type of event. Given these potential concerns, I can certainly see why short-sellers might begin to add to their position in Microsoft Corporation (NASDAQ:MSFT) over the coming months.
