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 July 15 and July 31; that is, more than 45 million shares short. A third of the index’s components had short interest of more than 25 million shares.
While the new earnings reporting season was not as bad as many had feared, employment numbers were a disappointment and second-quarter gross domestic product was historically bad. And the pandemic showed no signs that it would fade anytime soon. Investors 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. After the caution seen in the prior period, short sellers seemed to find some focus, as there were several notable short interest swings in the period.
As of the middle of the month settlement date, the most recently reported period, short sellers favored Pfizer Inc. (NYSE: PFE), Exxon Mobil Corp. (NYSE: XOM) and Intel Corp. (NASDAQ: INTC) above all other Dow stocks.
Pfizer
> Shares short: around 53.49 million
> Change from prior period: 12.7%
> Percentage of float: 1.0
This sizable rise in the number of Pfizer shares short lifted the pharmaceutical leader to the top spot on the list. Short interest remained below the year-to-date high of around 61 million shares seen back in January, though. At the average daily trading volume on the latest settlement date, the days to cover figure was still less than two.
This maker of Lipitor, Viagra and Xanax is a frontrunner in the race for a COVID-19 vaccine, and it posted solid quarterly numbers. Its share price ended the latter half of July more than 7% higher, though it had been up over 10% at one point. The S&P 500 rose about 2% during the short interest period.
Pfizer stock closed most recently at $37.79 per share, after pulling back marginally in the past week. The 52-week low of $27.88 was seen in March, and the 52-week high of $40.97 was reached early this year. The shares now trade more than 3% lower than they did at the beginning of the year but are up over 30% from their March low.
Exxon
> Shares short: around 48.55 million
> Change from prior period: −7.87%
> Percentage of float: 1.2
After taking a breather in the previous period, short interest in the oil supermajor continued to shrink in the latter half of last month, and the stock dropped to the second spot on the most shorted Dow components list. At the average daily volume on the latest settlement date, it would take investors a little more than two days to cover their short interest.
Exxon posted quarterly results at the end of the period that were not as bad as they could have been. Short sellers watched the share price rise more than 2% but then fall and end the period down more than 4%. Note that the Dow ended the final two weeks of last month fractionally lower.
After a gain of 3% or so in the past week, Exxon Mobil stock closed trading most recently at $44.97 a share. That was in a 52-week range of $75.18 (last September) to $30.11 (in March). The most recent share price is more than 37% higher since the year-to-date low in March, compared to almost a 46% gain in the S&P 500.
Intel
> Shares short: more than 42.73 million
> Change from prior period: 28.5%
> Percentage of float: 1.0
Short interest rose to its highest level since mid-March, and that gain allowed the semiconductor leader to rise to the third spot on the list in the first two weeks of July. The number of shares short in the prior period was a 52-week low. The average daily trading volume surged in the period, and the days to cover figure shrank from about two to one.
Intel’s latest earnings disappointment was seen as a victory for some of its rivals. Because of the reaction to the quarterly report, Intel shares ended the two weeks trading about 19% lower, though they had been up over 4% earlier in the period. The Nasdaq saw a gain of around 3% between the latest settlement dates.
Intel stock was last seen trading at $48.19 a share, still up from the 52-week low of $43.63 from earlier this year but well off the $69.29 52-week high. The latest share price is down more 19% lower than at the beginning of the year, while the Nasdaq has gained more than 22% in that time.
And the Rest
Rounding out the top five most shorted Dow stocks on the most recent settlement date were Cisco Systems Inc. (NASDAQ: CSCO) and Microsoft Corp. (NASDAQ: MSFT). Both tech giants saw their share prices seesaw late last month. Yet, the former saw a notable bump in its short interest and JPMorgan downgraded it during the period, while short sellers yielded on the latter. Profit-taking undercut better than expected Microsoft earnings.
On the following list of short interest changes in the Dow stocks as of July 31, note that short sellers also moved on Chevron Corp. (NYSE: CVX) and UnitedHealth Group Inc. (NYSE: UNH) in a big way, even though the former posted dismal quarterly results and the latter topped expectations. However, those sellers got out of the way on Apple Inc. (NASDAQ: AAPL) before the coming iPhone launches and on Boeing Co. (NYSE: BA), perhaps thinking the aerospace giant had bottomed.
| Dow Stock | Short (millions) | Change | % Float |
|---|---|---|---|
| Pfizer | 53.49 | 12.68% | 0.96% |
| Exxon | 48.55 | −7.87% | 1.15% |
| Intel | 42.73 | 28.52% | 1.01% |
| Cisco | 37.78 | 8.47% | 0.90% |
| Microsoft | 36.47 | −8.58% | 0.49% |
| Visa | 35.84 | −2.34% | 2.13% |
| Verizon | 31.60 | 1.98% | 0.76% |
| Coca-Cola | 28.55 | 5.88% | 0.67% |
| Disney | 26.58 | 2.06% | 1.48% |
| Apple | 26.50 | −24.78% | 0.62% |
| JPMorgan | 24.07 | 9.29% | 0.80% |
| IBM | 22.61 | −2.72% | 2.54% |
| Walgreens | 18.92 | 7.98% | 2.63% |
| Chevron | 17.85 | 49.38% | 0.96% |
| Dow | 17.14 | 7.94% | 2.32% |
| Procter & Gamble | 15.16 | −4.01% | 0.61% |
| Merck | 13.70 | −6.43% | 0.54% |
| Walmart | 12.60 | 2.85% | 0.91% |
| Johnson & Johnson | 12.40 | −090% | 0.47% |
| Raytheon Technologies | 11.59 | −13.18% | 1.34% |
| Nike | 10.13 | −5.17% | 1.05% |
| Boeing | 9.88 | −10.51% | 1.77% |
| American Express | 9.25 | −2.63% | 1.15% |
| 3M | 6.68 | 2.76% | 1.16% |
| Caterpillar | 6.63 | −3.74% | 1.23% |
| Home Depot | 6.48 | −3.05% | 0.60% |
| McDonald’s | 6.04 | 3.31% | 0.81% |
| UnitedHealth | 5.70 | 12.94% | 0.60% |
| Travelers | 4.78 | −6.10% | 1.89% |
| Goldman Sachs | 3.87 | −5.07% | 1.17% |
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