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 wonder that only two of the 30 Dow stocks have had notable short interest lately; that is, at least 100 million shares short. In fact, only six of them had short interest of more than 50 million shares.
Yet the bull market is quite long in the tooth — now officially nine years old — and volatility has come roaring back into the markets in recent weeks. Investors may wonder then what the short sellers expect from some of the biggest, most well-respected names on Wall Street.
As of the February 28 settlement date, the most recently reported period, short sellers still favored just two Dow stocks, General Electric Co. (NYSE: GE) and Intel Corp. (NASDAQ: INTC), above all others.
GE saw the number of its shares short increase less than 1% in the final two weeks of last month, a pause after the 5% drop in the previous period. The more than 136.35 million shares reported most recently represented 1.4% of the conglomerate’s total float. The daily average volume dwindled again, and the days to cover reading ended the period at about two.
GE remained the Dow’s worst-performing stock of the year between the latest settlement dates. Shares ended the two-week short interest period almost 6% lower. In that time, the Dow retreated less than 1%. GE’s share price was last seen at $14.94, after sinking to a 52-week low of $13.95 earlier in the month. The 52-week high, which was reached last April, was $30.54 a share. The stock now is about 17% lower year to date.
More than 98.82 million Intel shares were sold short as of the most recent settlement date. The figure shrank by almost 5% in the period, and it was the first time since last July that the short interest was less than 100 million shares. It represented 2.1% of the company’s float as well. As of the end of last month, it would take more than three days for investors to cover all their short positions.
Intel was one of the stocks expected to benefit from the repatriation of overseas cash. The shares ended the short interest period about 7% higher, and it has continued to climb since then. Intel closed most recently at $52.19 a share, after hitting a multiyear high of $52.30 earlier in the day. The 52-week low is $33.23. And the share price now is more than 11% higher year to date.
Rounding out the top six on the most recent settlement date were Pfizer Inc. (NYSE: PFE), Apple Inc. (NASDAQ: AAPL), Cisco Systems Inc. (NASDAQ: CSCO) and Microsoft Corp. (NASDAQ: MSFT). Note that four of the six most shorted Dow stocks are from the technology sector. And note as well that Apple stood out as the only one among the top six with a sizable increase in the number of its shares short — a gain of more than 9.5 million shares, or 19.5%, over the mid-February settlement date.