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.
> 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%