In our latest analysis of The Best and Worst Dow Stocks, we dive into the performance of the International Business Machines Corporation (NYSE:IBM) in relation to its peers on the Dow Jones Industrial Average. Understanding where IBM stands is crucial, especially for investors looking to navigate the complexities of the current market environment.
The Dow Jones Industrial Average serves as a critical benchmark comprising 30 of the most prominent companies in the United States. This index not only reflects the strength of the U.S. economy but also carries significant historical weight, guiding investors and analysts alike in their decision-making.
However, the performance of these elite stocks is not uniform. Some companies soar due to innovation and favorable economic conditions, while others face challenges from various market trends. To equip our readers with actionable insights, we conducted a comprehensive breakdown of the index, evaluating the best and worst-performing stocks based on specific metrics.
Our methodology involved ranking each stock based on two main criteria: the number of hedge funds holding shares, and the percentage of short interest. By assigning a higher rank to stocks with fewer short positions, we aimed to unveil which companies are attracting positive investor sentiment, as indicated by hedge fund activity.
The result of this analysis is a carefully curated list, laid out in ascending order, with the strongest contenders topping the ranks. But why should investors pay attention to hedge fund interest? Research indicates that mimicking the best-performing hedge fund picks can significantly enhance market returns. Our quarterly newsletter has expertly selected 14 small-cap and large-cap stocks, achieving an impressive return of 373.4% since May 2014—218 percentage points above the benchmark.
As of now, IBM is held by 60 hedge funds, yet it currently stands out as one of the most shorted stocks on the Dow, with short interest at 2.27% as of April 30, 2025. This level of short interest could indicate underlying concerns among investors about the company’s performance.
In a notable move, IBM has committed to investing $150 billion over the next five years in the U.S. This financial initiative includes over $30 billion earmarked for research and development aimed at advancing the manufacturing of fundamental technologies like mainframe and quantum computing. CEO Arvind Krishna emphasized the importance of this commitment:
“We have been focused on American jobs and manufacturing since our founding 114 years ago, and with this investment and manufacturing commitment, we are ensuring that IBM remains the epicenter of the world’s most advanced computing and AI capabilities.”
However, it’s essential to consider the headwinds that IBM might face. Concerns related to its Consulting business have surfaced, particularly regarding potential spending cuts initiated by the U.S. Department of Government Efficiency (DOGE). Even though IBM reported better-than-expected first-quarter results, its shares watched a 5% decline. The company’s management has given guidance for a 5% revenue growth for the year, paired with an impressive free cash flow projection of $13.5 billion.
Overall, IBM ranks 30th on our list of best and worst Dow stocks. Though it shows potential, we believe that certain AI stocks present more lucrative opportunities with quicker timelines for returns. Remarkably, one AI stock has increased in value since the beginning of 2025, while popular AI stocks have suffered a decline of approximately 25%. For investors looking for compelling opportunities in the AI sector at an attractive valuation—less than five times earnings—our report on the cheapest AI stock offers valuable insights worth exploring.
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Disclosure: None. This article is originally published at Insider Monkey.