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 had notable short interest between April 30 and May 15; that is, more than 50 million shares short. In fact, just five of them had short interest of more than 40 million shares.
Yet the bull market is quite long in the tooth — now more than 10 years old — and concern about a coming recession remains as the trade war with China escalates. Investors may wonder then what the short sellers expect from some of the biggest, most well-respected names on Wall Street.
As of the May 15 settlement date, the most recently reported period, short sellers still favored Pfizer Inc. (NYSE: PFE), Intel Corp. (NASDAQ: INTC) and Apple Inc. (NASDAQ: AAPL) above all other Dow stocks.
> Shares short: 66.50 million
> Change from prior period: 39.8%
> Percentage of float: 1.1
After five double-digit percentage declines in a row, short sellers decided to pile on Pfizer again, pushing the stock back to the top spot on this list. But the latest figure is nowhere near the 156 million shares short back in January. At the daily average volume on the most recent settlement date, it would take almost three days for Pfizer short sellers to cover their positions.
Pfizer posted better than expected quarterly results at the end of last month. The shares ended the short interest period about 3% higher than where they started. Meanwhile, the Dow, like the S&P 500, retreated more than 3% between the settlement dates.
Shares closed last week’s trading at $41.95 apiece, only marginally higher than a week before. Pfizer’s 52-week low of $35.32 was seen about a year ago, and the 52-week high of $46.47 was reached this past December. The stock now is less than 4% lower than at the beginning of the year.
> Shares short: 56.75 million
> Change from prior period: 12.31%
> Percentage of float: 1.3
Short sellers found renewed interest in Intel too, ending three straight periods of modestly declining short interest. The number of shares short in the previous period was the lowest in at least a year. The average daily trading volume increased again in the latest period, and as of the middle of this month, it would take less than two days for investors to cover all their short positions.
Wall Street was not impressed with the guidance Intel offered in a presentation for analysts during the short interest period. The share price dropped more than 7% after the presentation, and it ended the period more than 11% lower than on the previous settlement date. The stock continued its retreat afterward as well.
Intel was last seen trading at $44.57 a share, down handily from the multiyear high of $59.59 seen last month. The 52-week low is $42.36 per share. Note that the latest share price is about 5% lower year to date, while the Nasdaq is up over 15% and the Dow has seen a gain of more than 9%.