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 August 14 and August 31; that is, more than 75 million shares short. A third of the index’s components had short interest of more than 20 million shares.
With the pandemic showing no signs that it will fade anytime soon, and a contentious election coming up, investors have been trying to figure out what to do next. They may wonder then what the short sellers have expected from some of the biggest, most well-respected names on Wall Street. Putting aside their caution in the previous period, short sellers seemed to find new enthusiasm for Dow stocks as the markets reached all-time highs again.
As of the end of the month settlement date, the most recently reported period, short sellers favored tech giants Intel Corp. (NASDAQ: INTC), Apple Inc. (NASDAQ: AAPL) and Microsoft Corp. (NASDAQ: MSFT) above all other Dow stocks. Note that both Exxon and Pfizer, previously the most shorted Dow stocks, are no longer included in the index.
Intel
> Shares short: more than 173.52 million
> Change from prior period: 315.4%
> Percentage of float: 4.1
Short interest more than tripled, and the semiconductor leader would have become king of the hill in the final two weeks of August even without the changes in the index. Note that the number of shares short was at a 52-week low in mid-July. The average daily trading volume rose somewhat in the latest period, but the days to cover figure soared to almost six.
Intel has lagged rivals like AMD and Nvidia in certain respects, but in other areas it exceeds them. Intel shares ended the final two weeks of last month trading about 4% higher. They had been down more than 1% earlier in the period, and they have retreated recently. The Nasdaq saw a gain of over 7% between the most recent settlement dates.
Intel stock was last seen trading at $48.96 a share. While that is up from the 52-week low of $43.63 from earlier this year, it is still well off the $69.29 52-week high, also seen early this year. The latest share price is down more than 18% since the beginning of the year, while the Nasdaq has gained more than 24% in that time.
Apple
> Shares short: over 79.68 million
> Change from prior period: 236.8%
> Percentage of float: 0.5
The number of Apple shares short also soared in the period, though that was due primarily to its four-for-one stock split late last month. On a split-adjusted basis, this was the lowest level of short interest since May. At the average daily trading volume on the latest settlement date, the days to cover figure was still less than one.
Some analysts saw more upside for the stock even though Apple hit a $2 trillion market cap. Its share price ended the second half of August about 12% higher than where it began, though it has pulled back somewhat since then. The S&P 500 rose less than 4% during the short interest period.
Apple stock closed most recently at $113.49 per share, after retreating more than 6% in the past week. The 52-week low of $53.15 was seen back in March, and the 52-week high of $137.98 was reached last week. The shares now trade about 55% higher year to date and are up around 98% from the March low.
24/7 Wall St.Microsoft
> Shares short: more than 36.46 million
> Change from prior period: 23.0%
> Percentage of float: 0.5
With this notable bump in its short interest, the maker of Windows, Office and the Xbox lands in the third spot on the most shorted Dow components list. Short interest was at a 52-week low in the prior period. At the average daily volume on the latest settlement date, it would take investors more than a day to cover their short interest.
Microsoft was one of the few companies chasing Apple in the top market cap club. Short sellers watched the share price climb more than 7% during the period, though it had been up about 10% at one point. It has pulled back since then. Note that the Dow ended the latter half of last month up less than 2%.
After a pullback of over 5% in the past week, Microsoft stock closed trading most recently at $205.37 a share. That was in a 52-week range of $232.86 (last week) to $132.52 (in March). The most recent share price is more than 29% higher since the year-to-date low in March, compared to a gain of more than 41% in the Nasdaq 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 Verizon Communications Inc. (NYSE: VZ). The share price of each was little changed by the end of those two weeks. Yet, the former saw a modest rise in its short interest in that time, in the wake of a disappointing quarterly report, while short sellers yielded just a bit on the other, which is seen as a safe harbor stock.
On the following list of short interest changes in the Dow stocks as of August 31, note the number of companies that saw sizable increases in their short interest, including Boeing, Goldman Sachs, Johnson & Johnson, McDonald’s and Walmart. Short sellers appear to have thrown off the caution they displayed in the previous period.
| Dow Stock | Short (millions) | Change | % Float |
|---|---|---|---|
| Intel | 173.52 | 315.40% | 4.08% |
| Apple | 79.68 | 236.81% | 0.47% |
| Microsoft | 36.46 | 23.03% | 0.49% |
| Cisco | 31.40 | 5.32% | 0.74% |
| Verizon | 30.06 | −0.90% | 0.73% |
| Visa | 28.36 | 8.01% | 1.68% |
| IBM | 22.63 | 4.76% | 2.54% |
| Disney | 22.45 | −9.02% | 1.24% |
| JPMorgan | 22.29 | 9.78% | 0.74% |
| Walmart | 20.05 | 17.08% | 1.23% |
| Coca-Cola | 19.63 | −9.00% | 0.46% |
| Walgreens | 19.04 | 8.53% | 2.65% |
| Chevron | 18.86 | 9.14% | 1.01% |
| Dow | 14.59 | −7.65% | 1.97% |
| Procter & Gamble | 14.44 | 4.64% | 0.58% |
| Salesforce | 12.45 | 15.45% | 1.42% |
| Merck | 12.11 | 2.63% | 0.48% |
| American Express | 11.08 | 11.91% | 1.38% |
| Johnson & Johnson | 10.56 | 11.89% | 0.40% |
| Nike | 10.36 | 2.26% | 1.07% |
| Boeing | 9.18 | 14.02% | 1.63% |
| 3M | 7.71 | 15.50% | 1.34% |
| Home Depot | 7.36 | 19.54% | 0.68% |
| Caterpillar | 7.00 | 12.03% | 1.29% |
| McDonald’s | 6.89 | 13.67% | 0.93% |
| Amgen | 6.20 | 41.44% | 1.06% |
| Honeywell | 5.66 | 16.35% | 0.81% |
| UnitedHealth | 5.57 | 1.88% | 0.59% |
| Travelers | 5.07 | 9.80% | 2.01% |
| Goldman Sachs | 4.82 | 23.11% | 1.46% |
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