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 three of the 30 Dow stocks had sizable short interest between November 29 and December 13; that is, more than 55 million shares short. In fact, just six of them had short interest of more than 35 million shares.
While the bull market is quite long in the tooth — now well more than a decade old — and concern about a possible recession remains as the trade war uncertainties continue, the markets are again trading near 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 the year winds down.
As of the mid-December settlement date, the most recently reported period, short sellers favored Microsoft Corp. (NASDAQ: MSFT), Pfizer Inc. (NYSE: PFE) and Intel Corp. (NASDAQ: INTC) above all other Dow stocks.
Microsoft
> Shares short: more than 63.93 million
> Change from prior period: 4.6%
> Percentage of float: 0.9
Microsoft’s short interest has grown in six of the seven past periods to a year-to-date high, and the tech giant found itself in the top spot on this list as earlier this month. The days to cover figure remained about three as the average daily volume decreased somewhat during the period.
Some analysts recommend sticking with old-school tech stocks like Microsoft for the new year. Its share price ended those two weeks more than 2% higher, though the shares were in the red at one point in the period. They pulled back somewhat just after the settlement date as well.
After ending the past week less than 2% higher, Microsoft stock closed trading most recently at $157.38 a share. That was in a 52-week range of $93.96 (seen almost a year ago) to $158.48 (last week). The most recent share price is more than 55% higher than at the beginning of the year, compared to around a 22% gain for the Dow in that time.
Pfizer
> Shares short: about 58.84 million
> Change from prior period: 1.5%
> Percentage of float: 1.1
While the latest number of shares short is nowhere near the 97 million year-to-date high seen last February, the marginal bump in the first half of December saw this pharmaceutical giant place comfortably as the second most shorted Dow stock. It would take investors a little more than three days to cover their short interest.
The maker of Lipitor, Viagra and Xanax appeared to be poised to be one of the Dogs of the Dow for 2020. Its shares ended the first two weeks of this month more than 2% higher than where they started, though they had been down more than 4% earlier in the period. The Nasdaq was up less than 2% in that time.
Shares closed most recently at $39.29 apiece, after rising fractionally in the past week. Apple’s 52-week low of $33.97 was seen in last August, and the 52-week high of $44.56 was reached back in July. The stock now trades over 9% lower than at the beginning of the year.
Intel
> Shares short: more than 57.45 million
> Change from prior period: −2.3%
> Percentage of float: 1.3
Intel short interest took a breather after five consecutive periods of increases. Note that the year-to-date high of more than 63 million shares back occurred back in July. At the average daily trading volume on the latest settlement date, it still would take these investors more than three days to cover their short bets.
Some analysts consider Intel to be a best bet value pick for 2020. Short sellers watched the shares pull back more than 4% but recover most of that decline by the end of the two weeks. The stock retreated again after the settlement date, but it is now up more than 23% from six months ago.
Intel was last seen trading at $59.41 a share, not far from the multiyear high of $59.78 seen earlier this week and well above the 52-week low of $42.86. The latest share price is around 26% higher than at the beginning of the year, but the Nasdaq is up over 34% year to date and the Dow has seen that gain of about 22%.
And the Rest
Rounding out the top six most shorted Dow stocks on the most recent settlement date were Apple Inc. (NASDAQ: AAPL), Exxon Mobil Corp. (NYSE: XOM) and Verizon Communications Inc. (NYSE: VZ). Of these, only Verizon saw growth in the number of its shares short during the first half of December. The share prices of Exxon and Verizon rose marginally during the period, while shares of the iPhone maker continued this year’s spectacular run during those two weeks. Note that Exxon and Verizon also look like they will be among the Dogs of the Dow for 2020.
Furthermore, notice on the following list of short interest changes in Dow stocks as of December 13 the notable rise at Johnson & Johnson (NYSE: JNJ), Nike Inc. (NYSE: NKE) and Visa Inc. (NYSE: V).
| Dow Stock | Short (millions) | Change | % Float |
|---|---|---|---|
| Microsoft | 63.93 | 4.59% | 0.85% |
| Pfizer | 58.84 | 1.49% | 1.06% |
| Intel | 57.45 | −2.26% | 1.33% |
| Apple | 50.75 | −20.07% | 1.14% |
| Exxon | 38.33 | −2.37% | 0.91% |
| Verizon | 36.40 | 3.05% | 0.88% |
| Coca-Cola | 34.35 | 5.13% | 0.81% |
| Cisco | 33.30 | −3.85% | 0.79% |
| Visa | 32.04 | 11.30% | 1.87% |
| JPMorgan | 30.75 | 3.21% | 0.99% |
| Merck | 24.38 | −1.16% | 0.96% |
| Procter & Gamble | 22.93 | 2.71% | 0.92% |
| Johnson & Johnson | 20.87 | 21.24% | 0.79% |
| Chevron | 20.29 | 0.76% | 1.07% |
| Walgreens | 19.43 | 0.58% | 2.63% |
| Walmart | 17.12 | 4.44% | 1.23% |
| Disney | 17.08 | −9.39% | 0.95% |
| IBM | 15.12 | 8.89% | 1.72% |
| Dow | 11.63 | −2.91% | 1.57% |
| UnitedHealth | 10.37 | −2.19% | 1.10% |
| 3M | 9.96 | −2.74% | 1.73% |
| Nike | 9.41 | 23.08% | 0.78% |
| Caterpillar | 8.78 | −9.61% | 1.59% |
| Home Depot | 7.81 | −7.52% | 0.73% |
| American Express | 7.47 | 2.33% | 0.92% |
| United Technologies | 7.31 | −3.85% | 0.85% |
| McDonald’s | 7.07 | 4.88% | 0.94% |
| Goldman Sachs | 6.63 | 0.51% | 2.01% |
| Boeing | 5.29 | −4.64% | 0.94% |
| Travelers | 4.38 | 10.47% | 1.70% |
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