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 surprise that only two of the 30 Dow stocks had notable short interest between August 15 and August 30; that is, more than 50 million shares short. In fact, just five of them had short interest of more than 35 million shares.
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While the bull market is quite long in the tooth — now well more than 10 years old — and concern about a possible recession remains as the trade war with China continues to ramp up, the markets are still not that far from all-time highs. Investors may wonder then what the short sellers expect from some of the biggest, most well-respected names on Wall Street.
As of the end of August settlement date, the most recently reported period, short sellers favored Pfizer Inc. (NYSE: PFE), Intel Corp. (NASDAQ: INTC) and Microsoft Corp. (NASDAQ: MSFT) above all other Dow stocks.
Pfizer
> Shares short: about 58.89 million
> Change from prior period: 6.6%
> Percentage of float: 1.0
Pfizer returned to the top of the list in the latest settlement period, a position it has held for most of the time since May. Note though that the latest figure is nowhere near the 156 million shares short seen back in January.
Pfizer recently invested $500 million in a state-of-the-art gene therapy facility in North Carolina. Its shares ended the latter two weeks of last month almost 4% higher than where they started, despite being down marginally early in the period. Meanwhile, the Dow saw a gain of more than 3% between the settlement dates.
Shares closed most recently at $37.39 apiece, about 4% higher in the past week. Pfizer’s 52-week low of $33.97 was seen at the beginning of the short interest period, and the 52-week high of $46.47 was from this past December. The stock now trades more than 14% lower than at the beginning of the year.
Intel
> Shares short: around 55.36 million
> Change from prior period: −3.9%
> Percentage of float: 1.2
This modest retreat was enough for Intel to slip back down to the number two spot on the most shorted Dow stock list. It was also the smallest number of shares since back in May.
Like other tech giants, Intel has considerable exposure to trade issues with China. The share price ended the short interest period about 3% higher, though it had been down more than 2% earlier in the period. Note that the Nasdaq ended those two weeks up a little more than 1%, despite being down that much at the beginning of the period.
Intel was last seen trading at $52.79 a share, nearer the multiyear high of $59.59 seen this past spring than the 52-week low of $42.36. The latest share price is more than 12% higher than at the beginning of the year, but the Nasdaq is up 23% or so year to date and the Dow has seen a gain of over 16%.
Microsoft
> Shares short: about 45.98 million
> Change from prior period: −5.9%
> Percentage of float: 0.6
Microsoft’s short interest had grown for five of the past seven periods, but the 52-week high of more than 58 million shares short was posted back in January, and the latest reading was the lowest level since back in May.
24/7 Wall St.Microsoft has partnered with Nvidia to make improvements to popular video game Minecraft. Short sellers watched the share price gain around 4%, pull back as much and start to recover in those two weeks, ending up more than 3%. The shares climbed a bit afterward though. The S&P 500 ended the latter half of last month with a gain of almost 2%.
After slipping about 2% in the past week, Microsoft stock ended trading most recently at $136.12 a share. That was in a 52-week range of $93.96 (seen last December) to $141.68 (in late July). The most recent share price is around 32% higher than at the beginning of the year, compared to that gain of 16% or so for the Dow.
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And the Rest
Rounding out the top six most shorted Dow stocks on the most recent settlement date were Apple Inc. (NASDAQ: AAPL) and Exxon Mobil Corp. (NYSE: XOM). The former saw a sharp drop in the number of its shares short during the final two weeks of August, while the latter had only marginally shrinking short interest. Share prices of both rose but gave up their gains in that time. The iPhone maker is still a Warren Buffett pick despite the insane market, and analysts remained cautious on the Big Oil leader late last month.
Also notice on the following list of short interest changes in Dow stocks as of August 30 the lack of double-digit gains. That suggests that short sellers were cautious overall in the dog days of summer:
| Dow Stock | Short (millions) | Change | % Float |
|---|---|---|---|
| Pfizer | 58.89 | 6.63% | 1.07% |
| Intel | 53.36 | −3.86% | 1.21% |
| Microsoft | 45.98 | −5.93% | 0.61% |
| Apple | 39.52 | −13.33% | 0.88% |
| Exxon | 37.26 | −0.58% | 0.88% |
| Cisco | 34.65 | −8.69% | 0.82% |
| Verizon | 34.57 | 3.69% | 0.84% |
| Coca-Cola | 31.97 | −3.49% | 0.75% |
| Visa | 27.70 | 1.51% | 1.60% |
| Walgreens | 25.27 | −6.15% | 3.35% |
| JPMorgan | 23.43 | 9.45% | 0.74% |
| Merck | 20.13 | −7.77% | 0.79% |
| Procter & Gamble | 20.07 | −1.28% | 0.80% |
| Chevron | 17.61 | −4.17% | 0.93% |
| Disney | 17.36 | 2.67% | 0.97% |
| IBM | 16.10 | 0.23% | 1.82% |
| Walmart | 15.48 | −6.19% | 1.19% |
| Johnson & Johnson | 14.28 | −7.84% | 0.54% |
| Home Depot | 10.27 | −0.56% | 0.94% |
| Dow | 9.55 | 3.19% | 1.29% |
| Nike | 8.71 | −1.55% | 0.72% |
| 3M | 8.64 | −4.45% | 1.50% |
| Caterpillar | 8.41 | 7.31% | 1.50% |
| UnitedHealth | 7.84 | 6.13% | 0.83% |
| Goldman Sachs | 7.55 | −2.54% | 2.25% |
| United Technologies | 5.83 | 1.55% | 0.68% |
| McDonald’s | 5.68 | −8.29% | 0.75% |
| American Express | 5.60 | −10.30% | 0.68% |
| Boeing | 5.29 | 1.49% | 0.94% |
| Travelers | 3.98 | −19.83% | 1.53% |
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