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 May 15 and May 29; that is, more than 50 million shares short. A third of the index’s components had short interest of more than 25 million shares.
The stock market had recovered much of its panic-selling losses from March and the slow reopening of the economy brought with it some optimism, even though employment and other economic numbers still looked fairly grim. Investors still trying to figure out what to do next may wonder then what the short sellers expected from some of the biggest, most well-respected names on Wall Street. Did they expect the lows to be retested?
As of the end of the month settlement date, the most recently reported period, short sellers still favored Exxon Mobil Corp. (NYSE: XOM), Pfizer Inc. (NYSE: PFE) and Microsoft Corp. (NASDAQ: MSFT) above all other Dow stocks.
Exxon
> Shares short: around 60.61 million
> Change from prior period: 1.5%
> Percentage of float: 1.4
Short seller interest continued in the most recent period, and the oil supermajor remained the most shorted Dow stock late last month. Not that long ago, Exxon had hovered around the number five spot on the list for a time before floating up to the surface. At the average daily volume on the latest settlement date, the days to cover figure was less than two.
Exxon was among the Dividend Aristocrats some investors were looking to for safety in the pandemic recession. Short sellers watched the share price rise more than 7% by the end of the period, though it had been up about 11% at one point. The Dow ended the latter two weeks of May about 7% higher as well.
After popping more than 17% the past week, Exxon Mobil stock closed trading most recently at $53.52 a share. That was in a 52-week range of $77.93 (last July) to $30.11 (in March). The most recent share price is more than 63% higher since the year-to-date low in March, compared to a 40% or so gain in the S&P 500.
Pfizer
> Shares short: around 52.04 million
> Change from prior period: −1.0%
> Percentage of float: 0.9
This slight decline in Pfizer shares short still left the pharmaceutical leader clinging to the number two spot on the list. The latest figure was still well below the year-to-date high of around 61 million shares short seen back in January. At the average daily trading volume on the latest settlement date, it would take investors less than two days to cover their short interest.
The maker of Lipitor, Viagra and Xanax recently decided to halt a disappointing breast cancer study. Its shares ended fractionally higher in the final two weeks of last month, despite being down more than 2% earlier in the period. The S&P 500 rose more than 6% during the short interest period.
Pfizer stock closed most recently at $36.21 per share, which is over 5% lower than a week ago. The 52-week low of $27.88 was seen in March, and the 52-week high of $44.56 was reached last July. The shares now trade more than 7% lower than they did at the beginning of the year but are up almost 25% from the March low.
Microsoft
> Shares short: more than 40.83 million
> Change from prior period: −7.7%
> Percentage of float: 0.6
Microsoft remained at the number three spot on the list in the latter half of May despite the fourth sizable retreat in a row. It is again approaching the 52-week low of around 37 million shares that occurred back in February. It would take these investors more than a day to cover their short bets, as of the end of last month.
Microsoft and its shares were among those that were not only surviving but thriving in the pandemic recession. The shares ended the two weeks trading about 2% higher, though they had been up more than 3% earlier in the period. The Nasdaq saw a gain of about 6% during the short interest period, marginally lagging the performance of the Dow and the S&P 500.
Microsoft stock was last seen trading at $189.80 a share, after reclaiming the multiyear high of $190.70 on Tuesday. The 52-week low of $119.01 was reached last summer. The latest share price is more than 19% higher than the year-to-date low during the pandemic sell-off, while the Nasdaq is up almost 26% in that time.
And the Rest
Rounding out the top five most shorted Dow stocks on the most recent settlement date were Intel Corp. (NASDAQ: INTC) and Cisco Systems Inc. (NYSE: CSCO). The former tech giant saw the number of its shares short rise marginally late last month, while short sellers yielded just a bit on the latter. Intel stock ended the period more than 6% higher, in the wake of its new 10th generation desktop processor release. Cisco’s share price was up about 9% by the end of the month. The company announced the acquisition of cloud company ThousandEyes at month’s end.
Note on the following list of short interest changes in Dow stocks as of May 29 the surges in Disney, Home Depot, Raytheon and UnitedHealth. Each bucked the overall trend of shrinking short interest in the period.
| Dow Stock | Short (millions) | Change | % Float |
|---|---|---|---|
| Exxon | 60.61 | 1.51% | 1.44% |
| Pfizer | 52.04 | −1.05% | 0.94% |
| Microsoft | 40.83 | −7.70% | 0.55% |
| Intel | 38.64 | 2.23% | 0.91% |
| Cisco | 34.40 | −0.55% | 0.82% |
| Apple | 34.19 | 1.79% | 0.79% |
| Visa | 32.59 | 1.24% | 1.93% |
| Verizon | 28.77 | −6.31% | 0.70% |
| Disney | 28.35 | 12.34% | 1.58% |
| Coca-Cola | 26.51 | −9.30% | 0.62 |
| IBM | 20.81 | −3.27% | 2.35% |
| JPMorgan | 20.60 | −16.95% | 0.68% |
| Raytheon Technologies | 18.20 | 15.17% | 2.10% |
| Chevron | 17.72 | −16.92% | 0.95% |
| Dow | 17.68 | −1.70% | 2.39% |
| Merck | 15.81 | −16.76% | 0.63% |
| Procter & Gamble | 15.50 | −17.15% | 0.63% |
| Walgreens | 15.47 | −25.82% | 2.12% |
| Boeing | 14.99 | −14.67% | 2.69% |
| Walmart | 13.50 | −11.89% | 0.97% |
| Johnson & Johnson | 13.01 | −20.04% | 0.49% |
| Nike | 11.90 | 4.16% | 0.99% |
| Home Depot | 11.37 | 10.87% | 1.06% |
| American Express | 11.17 | −1.46% | 1.40% |
| Caterpillar | 8.25 | −10.65% | 1.53% |
| UnitedHealth | 7.77 | 31.94% | 0.82% |
| McDonald’s | 7.55 | 3.83% | 1.02% |
| 3M | 7.22 | −12.87% | 1.26% |
| Goldman Sachs | 6.57 | 1.08% | 1.99% |
| Travelers | 3.97 | −18.38% | 1.58% |
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