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 December 31 and January 15; that is, more than 50 million shares short. Nine of them, or almost a third, had short interest of more than 30 million shares.
While the bull market is quite long in the tooth — now well more than a decade old — and political and geopolitical concerns continue to grow, the markets still have been trading near all-time highs. Investors may wonder then what the short sellers expected from some of the biggest, most well-respected names on Wall Street as the new year got underway.
As of the mid-month 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: nearly 63.64 million
> Change from prior period: 1.5%
> Percentage of float: 0.9
Microsoft’s marginal short interest bump put it at the second-highest level in the past year, and the tech giant found itself still in the top spot on this list. The days to cover figure remained about three though the average daily volume decreased somewhat during the period. Short interest has been more than 60 million since the end of October.
Wall Street seemed to have high expectations for Microsoft in 2020 during the period. Its share price ended those two weeks almost 3% higher, which was marginally lower than the Nasdaq, despite being in the red early in the period. The shares continued to rise after the settlement date as well.
After ending the past week almost 3% lower, Microsoft stock closed trading most recently at $162.28 a share. That was in a 52-week range of $102.17 (seen about a year ago) to $168.19 (last week). The most recent share price is more than 54% higher than a year ago, compared to around an 18% gain for the Dow.
Pfizer
> Shares short: around 56.97 million
> Change from prior period: −0.3%
> Percentage of float: 1.0
The latest number of shares short was barely down from the prior period, and it is nowhere near the 97 million 52-week high seen last February. Still, this pharmaceutical giant was the second most shorted Dow stock in the first two weeks of the year. It would take investors nearly three days to cover their short interest.
The maker of Lipitor, Viagra and Xanax has some big drug price hikes planned for 2020. Its shares ended the first two weeks of January more than 4% higher, despite being in the red earlier in the period. Shares pulled back some afterward. The Dow and the S&P 500 were both up less than 2% during the short interest period.
Pfizer stock closed most recently at $40.16 per share, which is down less than 1% in the past week. The 52-week low of $33.97 was seen last August, and the 52-week high of $44.56 was reached back in July. The stock now trades more than 2% higher than it did at the beginning of the year.
Intel
> Shares short: more than 55.76 million
> Change from prior period: −5.2%
> Percentage of float: 1.3
Intel short interest has risen in seven of the past eight periods, and after the first two weeks of the year, it found itself in the number three spot on the list. Note that the 52-week high of more than 63 million shares 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.
Intel is a top Merrill Lynch stock pick for 2020. Short sellers watched the shares pull back about 3% in the two weeks, much of that decline coming early in the period. The stock jumped handily after the settlement date, due to a positive earnings report, and now it is up about 8% year to date.
Intel was last seen trading at $65.69 a share, down from the recent multiyear high of $69.29, but well above the 52-week low of $42.86 seen last May. The latest share price is around 8% higher than at the beginning of the year, while the Nasdaq is up only fractionally year to date.
And the Rest
Rounding out the top five 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 sizable drop in its short interest, as shares rose more than 5% and Wall Street expectations for the stock continued to grow. The oil supermajor saw a small gain in its shares sold short in those two weeks, coming in shy of 40 million, while its share price decreased by less than 2% in that time. Note that Merrill Lynch remained bullish on stock for 2020.
Also notice on the following list of short interest changes in Dow stocks as of January 15 the sizable rise at Disney (after the much-hyped launch of its streaming service) and McDonald’s (racial discrimination lawsuits).
| Dow Stock | Short (millions) | Change | % Float |
|---|---|---|---|
| Microsoft | 63.64 | 1.49% | 0.85% |
| Pfizer | 56.97 | −0.30% | 1.03% |
| Intel | 55.76 | −5.16% | 1.28% |
| Apple | 41.60 | −8.61% | 0.95% |
| Exxon | 39.58 | 1.99% | 0.94% |
| Coca-Cola | 36.63 | −2.22% | 0.86% |
| Cisco | 35.48 | −2.08% | 0.84% |
| Verizon | 34.37 | −11.11% | 0.83% |
| Visa | 30.71 | −1.97% | 1.80% |
| JPMorgan | 25.21 | −11.66% | 0.81% |
| Merck | 24.92 | −0.94% | 0.98% |
| Chevron | 21.11 | −1.87% | 1.12% |
| Walgreens | 20.50 | −6.81% | 2.78% |
| Johnson & Johnson | 20.42 | −0.38% | 0.78% |
| Procter & Gamble | 19.28 | −11.78% | 0.78% |
| Disney | 18.77 | 10.07% | 1.04% |
| Walmart | 17.74 | 2.73% | 1.27% |
| IBM | 16.82 | 3.98% | 1.90% |
| Dow | 13.19 | 4.58% | 1.78% |
| 3M | 10.69 | 7.49% | 1.86% |
| UnitedHealth | 9.62 | −8.89% | 1.02% |
| Home Depot | 9.47 | −8.29% | 0.87% |
| McDonald’s | 8.77 | 16.47% | 1.17% |
| Nike | 8.71 | −10.65% | 0.72% |
| United Technologies | 7.85 | 4.83% | 0.91% |
| American Express | 7.77 | 4.31% | 0.96% |
| Caterpillar | 6.86 | −14.80% | 1.24% |
| Goldman Sachs | 6.62 | 9.26% | 2.00% |
| Boeing | 6.45 | 1.70% | 1.15% |
| Travelers | 4.17 | 2.36% | 1.64% |
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