It takes a certain kind of courage to short sell blue chips, such as the Dow Jones industrial average components. Short sellers are betting on these companies to fail, or at least for their share prices to fall handily. Plus, those sellers are responsible for paying the dividends on the stocks they short.
Maybe it is little wonder that only three of the 30 Dow stocks had notable short interest between May 31 and June 14; that is, more than 50 million shares short. In fact, just six of them had short interest of more than 35 million shares.
Yet the bull market is quite long in the tooth — now more than 10 years old — and concern about a coming recession remains as the trade war with China drags on. Investors may wonder then what the short sellers expect from some of the biggest, most well-respected names on Wall Street.
As of the June 14 settlement date, the most recently reported period, short sellers favored Pfizer Inc. (NYSE: PFE), Intel Corp. (NASDAQ: INTC) and Cisco Systems Inc. (NASDAQ: CSCO) above all other Dow stocks.
Pfizer
> Shares short: about 63.79 million
> Change from prior period: −8.0%
> Percentage of float: 1.1
After two periods of rising short interest ended five double-digit percentage declines in a row before that, short sellers have now taken another breather. The stock remains at the top spot on this list, though the latest figure is nowhere near the 156 million shares short back in January. At the daily average volume on the most recent settlement date, it would take about three days for Pfizer short sellers to cover their positions.
Pfizer announced this month the acquisition of Array BioPharma, and it has one of the highest paid CEOs. The shares ended the short interest period more than 2% higher than where they started. Meanwhile, the Dow, like the S&P 500, gained almost 5% between the settlement dates.
Shares of Pfizer closed most recently at $43.76 apiece, less than 2% higher than a week before. Pfizer’s 52-week low of $36.00 was seen about a year ago, and the 52-week high of $46.47 was from this past December. Still, the stock now is trading in the same ballpark as at the beginning of the year.
Intel
> Shares short: nearly 55.99 million
> Change from prior period: 5.4%
> Percentage of float: 1.3
After a double-digit percentage bump followed by a modest decline in the previous two periods, short sellers once more found renewed interest in Intel stock. The average daily trading volume decreased again in the latest period, and as of the middle of this month, it would take more than two days for investors to cover all their short positions.
Some see Intel as a solid trade war stock pick due to its upside potential and its dividend. While the share price ended the short interest period more than 4% higher, it had been up more than 6% at one point. The Nasdaq saw a gain of more than 4% in that same time, though it has pulled back recently.
Intel was last seen trading at $46.85 a share, down handily from the multiyear high of $59.59 seen this spring. The 52-week low is $42.36 per share. Note that the latest share price is about the same as it was at the beginning of the year, while the Nasdaq is up almost 19% year to date and the Dow has seen a gain of nearly 14%.
Cisco
> Shares short: about 52.19 million
> Change from prior period: 19.50%
> Percentage of float: 1.19
The number of shares short has risen for four consecutive periods and reached a level not seen in at least a year. The last time more than 50 million shares were short was in June of last year. The average daily trading volume shrank for the third straight period, so by the most recent settlement date, the number of days it would take for investors to cover all their short positions had risen to more than two, almost a year-to-date high.
Cisco shares overrunning the consensus target and hitting a 52-week high led to at least one analyst downgrade in the first half of this month. Short sellers watched the share price rise more than 9% but give back some of that gain and end the period only about 4% or so higher. That was about the same as the Dow’s rise between the settlement dates.
After slipping more than 1% in the past week, Cisco stock ended trading most recently at $56.08 a share. That was in a 52-week range of $40.25 (seen last December) to $58.15 (last week). The share price is more than 29% higher than at the beginning of the year, compared to the gain of less than 14% for the Dow.
And the Rest
Rounding out the top six most shorted Dow stocks on the most recent settlement date were Microsoft Corp. (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL) and Exxon Mobil Corp. (NYSE: XOM). Of these three, only Apple saw the number of its shares short shrink during the first two weeks of June, allowing it to slip from the top three on this list. Share prices of all three rose during the short interest period. While Cisco and Microsoft have helped lift the Dow to new all-time highs, that was not so true for Exxon.
Also notice on the following list short interest changes in Dow stocks as of June 14 the big swings at Visa, Caterpillar and Procter & Gamble:
| Dow Stock | Short (millions) | Change | % Float |
|---|---|---|---|
| Pfizer | 63.79 | −8.02% | 1.10% |
| Intel | 55.99 | 5.39% | 1.25% |
| Cisco | 52.19 | 19.50% | 1.19% |
| Microsoft | 47.81 | 6.77% | 0.63% |
| Apple | 47.00 | −8.30% | 1.00% |
| Exxon | 35.13 | 1.97% | 0.83% |
| Visa | 30.69 | 13.73% | 1.75% |
| Coca-Cola | 29.20 | 6.18% | 0.69% |
| Verizon | 27.98 | −1.27% | 0.68% |
| Walgreens | 24.02 | 2.84% | 3.02% |
| Procter & Gamble | 22.91 | 12.14% | 0.92% |
| JPMorgan | 22.85 | 7.04% | 0.70% |
| Chevron | 18.02 | 9.44% | 0.95% |
| Merck | 17.31 | −2.23% | 0.67% |
| Walmart | 15.72 | 5.82% | 1.10% |
| IBM | 15.69 | 4.86% | 1.76% |
| Disney | 15.58 | −10.77% | 1.05% |
| Johnson & Johnson | 14.43 | 7.73% | 0.54% |
| 3M | 10.59 | -7.48% | 1.84% |
| Home Depot | 10.35 | 1.28% | 0.92% |
| Caterpillar | 9.06 | −14.91% | 1.58% |
| Nike | 8.67 | −0.82% | 0.70% |
| UnitedHealth | 7.68 | 6.86% | 0.81% |
| American Express | 6.88 | −3.20% | 0.82% |
| McDonald’s | 6.32 | −6.47% | 0.83% |
| Dow | 6.76 | 0.41% | N/A% |
| Goldman Sachs | 6.57 | −1.12% | 1.91% |
| United Technologies | 5.42 | −9.34% | 0.63% |
| Boeing | 5.07 | −9.73% | 0.90% |
| Travelers | 4.01 | −6.41% | 1.53% |
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