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 sizable short interest between February 14 and February 28; that is, more than 45 million shares short. Nine of them, almost a third of the index’s components, had short interest of more than 25 million shares.
The long bull market — more than a decade old — finally came to an end last month. As coronavirus concerns grew, the markets became more volatile, and the long-awaited correction finally arrived. Investors may wonder then what the short sellers expected from some of the biggest, most well-respected names on Wall Street as stocks tumbled.
As of the end-of-month settlement date, the most recently reported period, short sellers favored Pfizer Inc. (NYSE: PFE), Intel Corp. (NASDAQ: INTC) and Exxon Mobil Corp. (NYSE: XOM) above all other Dow stocks.
Pfizer
> Shares short: around 53.67 million
> Change from prior period: −8.5%
> Percentage of float: 1.0
Despite this notable decline to the lowest number of shares short so far this year, Pfizer remained the most shorted Dow stock. Disappointing fourth-quarter results had pushed the stock back to the top of the list last month. At the average daily trading volume on the latest settlement date, it would take investors around three days to cover their short interest.
The maker of Lipitor, Viagra and Xanax warned during the period that it would take a hit related to the coronavirus outbreak. Its shares ended the final two weeks last month more than 8% lower, though it had been down more than 11% just before the end of the period. Shares staged a short-lived recovery after the settlement date. The Dow was up more than 12% during the short interest period.
Pfizer stock closed most recently at $34.59 per share, which is down almost 2% in the past week. The 52-week low of $32.53 was seen at the end of the short interest period, and the 52-week high of $44.56 was reached back in July. The shares now trade over 11% lower than they did at the beginning of the year.
Intel
> Shares short: more than 47.71 million
> Change from prior period: 0.1%
> Percentage of float: 1.1
Intel short interest has risen in nine of the past 11 periods, and the stock climbed to the number two spot on the list in the latter half of last month. Note that the 52-week high of more than 63 million shares back occurred back in July. It would take these investors nearly three days to cover their short bets, as of the end of last month.
Intel, like many others, has been positioning itself for the coming 5G explosion. Short sellers watched the shares fall more than 16% during those two weeks, despite being marginally higher early in the period. The Nasdaq saw a pullback of about 11% during the short interest period, though, like the Dow and S&P 500, it has tumbled further recently.
Intel stock was last seen trading at $53.98 a share, down from the multiyear high of $69.29 reached in January but still above the 52-week low of $42.86 seen last May. The latest share price is 11% or so lower than at the beginning of the year, while the Nasdaq is down over 8% year to date.
Exxon
> Shares short: around 44.78 million
> Change from prior period: 13.9%
> Percentage of float: 1.0
This surge in short interest to the highest level in the past three periods (as well as short sellers fleeing from Microsoft) lifted the oil supermajor into the top three on this list. It had hovered around the number five spot in the past few periods. The average daily volume remains high, and the days to cover figure was last seen around two.
The energy sector was hammered by rising coronavirus fears and it led the stock market plunge. Exxon’s share price ended those two weeks more than 15% lower, despite being down nearly 21% at one point. The S&P 500 retreated about 12% in that time. Exxon shares pulled back further after the settlement date.
After retreating about 18% in the past week, Exxon Mobil stock closed trading most recently at $43.41 a share. That was in a 52-week range of $83.49 (seen last April) to $40.80 (this week). The most recent share price is almost 38% lower year to date, compared to a less than 11% decline in the S&P 500.
And the Rest
Rounding out the top five most shorted Dow stocks on the most recent settlement date were Verizon Communications Inc. (NYSE: VZ) and Cisco Systems Inc. (NASDAQ: CSCO). Both of them had growing short interest in those two weeks, the former a jump of more than 20%. Verizon stock fell by less than 8% in the period, and it is still seen as a safe haven stock pick. Cisco’s share price tumbled almost 16%, despite a rock-solid earnings report released last month.
Also notice the number of sizable swings on the following list of short interest changes in Dow stocks as of February 28, including at Apple and Microsoft, and at Caterpillar, Disney and McDonald’s, as short sellers repositioned themselves for the post-coronavirus markets.
| Dow Stock | Short (millions) | Change | % Float |
|---|---|---|---|
| Pfizer | 53.67 | −8.52% | 0.97% |
| Intel | 47.71 | 0.10% | 1.12% |
| Exxon | 44.78 | 13.85% | 1.06% |
| Verizon | 42.63 | 21.59% | 1.03% |
| Cisco | 37.90 | 2.76% | 0.90% |
| Microsoft | 37.03 | − 34.10% | 0.49% |
| Coca-Cola | 34.55 | −9.89% | 0.81 |
| Apple | 29.01 | −29.06% | 0.66% |
| Visa | 26.12 | 2.82% | 1.53% |
| JPMorgan | 24.74 | 1.15% | 0.81% |
| Disney | 23.35 | 20.57% | 1.30% |
| Walgreens | 21.16 | 1.70% | 2.87% |
| Procter & Gamble | 21.14 | 6.21% | 0.86% |
| Merck | 20.78 | −7.87% | 0.82% |
| IBM | 18.67 | −1.38% | 2.10% |
| Chevron | 16.67 | −21.25% | 0.89% |
| Johnson & Johnson | 16.63 | −8.45% | 0.63% |
| Walmart | 16.30 | −16.33% | 1.17% |
| United Technologies | 12.39 | 26.73% | 1.43% |
| Dow | 10.80 | 5.99% | 1.46% |
| Nike | 10.53 | 17.99% | 0.87% |
| 3M | 9.23 | −0.70% | 1.61% |
| McDonald’s | 8.82 | 15.88% | 1.18% |
| UnitedHealth | 8.78 | −3.53% | 0.93% |
| American Express | 8.76 | 11.73% | 1.09% |
| Home Depot | 8.54 | −10.11% | 0.78% |
| Boeing | 8.23 | −10.06% | 1.45% |
| Caterpillar | 6.91 | −26.91% | 1.26% |
| Goldman Sachs | 6.25 | 24.04% | 1.94% |
| Travelers | 3.62 | −3.42% | 1.42% |
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