Short-selling sentiment is often an underused and under-appreciated metric in the financial world. Reported twice a month, investors that follow this activity typically focus on the percentage of a stock’s overall float that is shorted—which is always useful—but bimonthly growth rates are also important to track. In the spirit of Insider Monkey’s "Terrible 20" list compile last year, let’s take a look at some mega-cap companies with the biggest increases in short-selling activity of late. Each stock listed here experienced a double-digit percentage surge in short interest in mid-January, and sports a market capitalization in excess of $100 billion.
Citigroup Inc. (NYSE:C)
On January 15th, the last FINRA short sale reporting date, Citigroup had a short interest of 33.9 million shares, good for a 29.4% increase from December 31st. The company issued its fourth quarter earnings just two days after the end of this filing period, whiffing on Wall Street’s estimates. On the heels of settlement costs related to its foreclosure business post-housing crash, Citi reported adjusted EPS of 69 cents, far lower than analysts’ 97-cent consensus.
In the time since, shares of the bank have traded slightly in the red, but overall declines have been minimal. Greater exposure to emerging markets gives Citigroup an obvious growth advantage over its peers, and shares still trade close to 8 times forward earnings. David Tepper and his hedge fund Appaloosa Management are one of Citigroup’s biggest supporters (see David Tepper’s favorite stock picks). We’d have to side with Tepper here, and it’s not advisable for investors to let Citigroup’s increased short interest deter them in this case.
Exxon Mobil Corporation (NYSE:XOM)
Exxon, meanwhile, has recently made headlines for passing Apple in terms of market cap, but the energy behemoth actually saw a much larger increase in short interest in the latest two-week period. Between December 31st and January 15th, the number of Exxon shares held by short sellers increased by 12.5%, while Apple’s short interest remained essentially flat. Exxon reports its Q4 earnings at the end of this week, and Wall Street is expecting EPS of $2.01 on the back of $126 billion in revenues. These figures represent year-over-year growth of 2.0% and 3.3% respectively. If the company can beat, there is room to run; shares currently trade at a 6% discount to their industry’s average.
Most analysts expect Exxon to reach these estimates, as the Brent WTI Spread was favorable in the fourth quarter. We’ll be watching this date closely, but it does appear that there are more short sellers betting on a disappointment.
What mega-caps remain?