Investing

Short Sellers Increase Bets Against Top Warren Buffett Stock Holdings

Wall Street and Main Street are both often easily impressed by short sellers. Sometimes short sellers are viewed with absolute hostility, and sometimes they are considered the smartest guys in the room. After all, short selling comes with potentially unlimited downside and it takes extra conviction to pay interest just to hold a position.

At certain times, short sellers are simply hated. After all, they are betting against the market and they are betting against prosperity. So what do investors try to make of it when short sellers increase their bets against the top stock holdings of Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A)? Isn’t Buffett supposed to be considered the greatest investor of all time?

24/7 Wall St. often tracks many key short interest moves from sectors, themes and groups. It turns out that all four of the largest holdings, which account for well over half of Buffett’s total public stock holdings, saw an increase in their short interest as of the May 29 settlement date.

Berkshire Hathaway itself is not that active for a key market stock, but the short interest against Berkshire Hathaway actually went down. Are short sellers betting against Buffett’s picks, but not betting against Buffett himself?

Buffett’s top four holdings are credit card issuer American Express Co. (NYSE: AXP), beverage giant Coca-Cola Co. (NYSE: KO), tech and IT giant International Business Machines Corp. (NYSE: IBM) and banking giant Wells Fargo & Co. (NYSE: WFC). Three of the four holdings are Dow Jones Industrial Average stocks, and arguably Wells Fargo should be a Dow stock.

24/7 Wall St. has compared the May 29 settlement date to the mid-May settlement to see what has happened. We have also added color on just how large Buffett’s position is from the latest full Buffett holdings.

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American Express

This company saw its short interest rise by 0.6% to 12,483,441 shares, with about two days to cover. Berkshire Hathaway owns about 151 million shares of American Express, which makes this total short interest seem irrelevant on the surface. After all, Buffett owns almost 12 times more shares than all the short sellers have had to borrow to bet against the company. Still, AmEx has been having its share of problems of late. While it is valued cheaply against Visa and MasterCard, its dividend yield of 1.5% is still very low for a Dow stock and for a top financial stock.

American Express shares were recently trading at $79.17. The stock has a consensus analyst price target of $86.04 and a 52-week trading range of $76.53 to $96.24.

Coca-Cola

The short interest in Coca-Cola rose by 1.2% to 29,176,302 shares as of the May 29 settlement date. Still, this is a lower short interest than we saw earlier in the year. Coca-Cola’s short interest almost certainly seems irrelevant to Buffett. After all, Buffett’s stake in Coca-Cola has been there for many years, has a cost-adjusted basis that has to be approaching zero and is close to 400 million shares. Buffett’s stake here is more than 13 times the size and value of the current short interest as a whole.

Coca-Cola shares were last seen at $40.20, with a consensus analyst price target of $44.82, and a 52-week range of $39.06 to $45.00. Coca-Cola’s current dividend yield is about 3.2%.

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