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 one of the 30 Dow stocks had sizable short interest between April 15 and April 30; that is, more than 50 million shares short. About a third of the index’s components had short interest of more than 25 million shares.
While the sudden bear market and the increased volatility looks ever more recessionary, stocks have recovered somewhat from the panic-selling lows in March. Investors still trying to figure out what to do next may wonder then what the short sellers expected from some of the biggest, most well-respected names on Wall Street. Do they see a V-bottom or expect the lows to be retested?
As of the end of last month settlement date, the most recently reported period, short sellers favored Exxon Mobil Corp. (NYSE: XOM), Pfizer Inc. (NYSE: PFE) and Microsoft Corp. (NASDAQ: MSFT) above all other Dow stocks.
> Shares short: around 58.83 million
> Change from prior period: −0.75%
> Percentage of float: 1.4
Short sellers continued to shy away in the most recent period, but the oil supermajor remained the most shorted Dow stock late last month. Not that long ago, Exxon had hovered around the number five spot on the list for a bit before floating up to the surface. At the average daily volume on the latest settlement date, the days to cover figure was less than two.
Exxon posted mixed first-quarter results as the pandemic weighed on global oil demand and created serious oversupply. Short sellers watched the share price start in the red but then rise almost 16% during the period, only to retreat somewhat afterward. The Dow saw a gain of only about 2% in the latter two weeks of April.
After rising about 1% the past week, Exxon Mobil stock closed trading most recently at $45.74 a share. That was in a 52-week range of $77.93 (last July) to $30.11 (in March). The most recent share price is almost 40% higher since the year-to-date low in March, which compares to a 21% or so gain in the S&P 500.
> Shares short: around 48.96 million
> Change from prior period: 10.51%
> Percentage of float: 0.9
While short sellers yielded on many of the Dow stocks, this bump for Pfizer lifted it one notch to the number two spot on the list. This was still well below the year-to-date high of around 61 million shares short in January. At the average daily trading volume on the latest settlement date, it would take investors more than a day to cover their short interest.
The maker of Lipitor, Viagra and Xanax posted better than expected first-quarter results during the period. Its shares ended more than 6% higher in the latter two weeks of last month, though they retreated somewhat afterward. The S&P 500 rose nearly 3% during the short interest period.
Pfizer stock closed most recently at $38.09 per share, which is in the same neighborhood as a week ago. The 52-week low of $27.88 was seen in March, and the 52-week high of $44.56 was reached back in July. The shares now trade less than 3% lower than they did at the beginning of the year, but they are up over 31% from the March low.
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