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 September 13 and September 30; that is, more than 50 million shares short. In fact, just five of them had short interest of more than 40 million shares.

While the bull market is quite long in the tooth — now well more than 10 years old — and concern about a possible recession remains as the trade war with China shambles on global economic growth slows, the markets have retreated a bit but are still not that far from all-time highs. Investors may wonder then what the short sellers expect from some of the biggest, most well-respected names on Wall Street as we head into the final quarter of the year.

As of the end of September settlement date, the most recently reported period, short sellers favored Microsoft Corp. (NASDAQ: MSFT), Intel Corp. (NASDAQ: INTC) and Pfizer Inc. (NYSE: PFE) above all other Dow stocks.

Microsoft
> Shares short: almost 53.04 million
> Change from prior period: 14.8%
> Percentage of float: 0.7

Microsoft’s short interest has grown in seven of the past nine periods, and this surge made it the king of the hill among Dow stocks as the third quarter concluded. The days to cover figure rose to more two as the average daily volume increased again late last month.

Microsoft offered up a dividend hike too large to ignore in September. The share price rose more than 4% in those two weeks, only to surrender about half that gain by the settlement date. That retreat continued afterward as well. The S&P 500 ended the latter half of last month with a fractional decline.

After ending in the past week with over a 2% gain, Microsoft stock closed trading most recently at $138.24 a share. That was in a 52-week range of $93.96 (seen last December) to $142.37 (last month). The most recent share price is around 36% higher than at the beginning of the year, compared to a 13% or so gain for the Dow.

Intel
> Shares short: almost 50.32 million
> Change from prior period: 4.4%
> Percentage of float: 1.1

In the previous short interest period, Intel had the smallest number of shares short in the past year. At the average daily trading volume on the latest settlement date, it would take these investors more than two days to cover their short bets.

Intel remains a common top holding in ESG (environmental, social and governance) funds. Short sellers watched the shares pull back more than 4% but then nearly recover between the settlement dates. Note that the Nasdaq ended those two weeks down around 1%, though it retreated more afterward.

Intel was last seen trading at $50.48 a share, well down from the multiyear high of $59.59 seen this past spring and nearer the 52-week low of $42.36. The latest share price is less than 8% higher than at the beginning of the year, but the Nasdaq is up 19% or so year to date and the Dow has seen that gain of about 13%.

Pfizer
> Shares short: about 47.83 million
> Change from prior period: −18.3%
> Percentage of float: 0.9

After topping the Dow short interest list in most periods since May, Pfizer dropped a couple notches in the final weeks of the third quarter. The days to cover figure was about two. Note that the latest number of shares short is nowhere near the 156 million seen back in January.

Pfizer has lagged the Dow this year but some see it as a solid defensive pick for the fourth quarter and beyond. Its shares ended the latter two weeks of last month almost 2% lower than where they started, despite being down almost 3% earlier in the period. Meanwhile, the Dow retreated only fractionally between the settlement dates.

Shares closed most recently at $35.69 apiece, more than 2% higher in the past week. Pfizer’s 52-week low of $33.97 was seen in August, and the 52-week high of $46.47 was from this past December. The stock now trades around 18% lower than at the beginning of the year.

Rounding out the top five most shorted Dow stocks on the most recent settlement date were Apple Inc. (NASDAQ: AAPL) and Exxon Mobil Corp. (NYSE: XOM). Both saw a gain in the number of its shares short during the final two weeks of September. The share price of Apple rose during the period too, more than 2%, and some analysts expect more upside to come. On the other hand, Exxon retreated about 5% during those two weeks. The surprise drone attack on Saudi oil facilities last month had an impact on many energy stocks.

Also notice on the following list of short interest changes in Dow stocks as of September 30 the double-digit surges in American Express, Boeing, Coca-Cola, Dow, Johnson & Johnson, McDonald’s, Merck, Nike, 3M, Travelers and Walmart as short sellers positioned themselves for the fourth quarter.

Dow Stock	Short (millions)	Change	% Float
Microsoft	53.04	14.76%	0.71%
Intel	50.32	4.44%	1.14%
Pfizer	47.83	−18.30%	0.87%
Apple	43.93	3.01%	0.97%
Exxon	41.42	9.30%	0.98%
Verizon	37.67	3.84%	0.91%
Visa	37.67	3.84%	0.91%
Cisco	36.45	5.62%	0.86%
Coca-Cola	34.31	19.12%	0.81%
JPMorgan	27.56	6.05%	0.87%
Walgreens	26.88	7.62%	3.56%
Procter & Gamble	23.41	7.77%	0.94%
Chevron	21.55	7.01%	1.14%
Merck	21.47	19.38%	0.84%
Disney	17.86	1.85%	0.99%
Walmart	17.71	12.35%	1.26%
Johnson & Johnson	16.66	17.10%	0.63%
IBM	15.17	−0.24%	1.71%
Home Depot	12.29	−0.51%	1.12%
Dow	10.40	12.65%	1.40%
3M	9.61	18.24%	1.67%
Nike	9.22	13.40%	0.76%
Caterpillar	8.94	3.49%	1.59%
UnitedHealth	8.43	8.79%	0.90%
McDonald’s	6.86	17.89%	0.90%
American Express	6.70	28.06%	0.81%
Goldman Sachs	6.50	−13.80%	1.93%
United Technologies	6.36	3.85%	0.74%
Boeing	5.82	14.48%	1.04%
Travelers	3.63	12.71%	1.40%

 

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