The short interest ratio of a stock means the number of shares sold short by investors, divided by the total number of floating shares of that stock. This is also an important measure of investor sentiment, as a high short ratio implies that investors expect the stock price to decline. On the other hand, a sharp decline in the short ratio of a stock means that short sellers expect the stock price to increase in the near future, which could mean they’ve abandoned their bearish thesis.
In this article, we’ll look at four major stocks and one ETF which saw a major decline in their short interest ratio ahead of the elections. Those stocks are Procter & Gamble Corporation (NYSE:PG), Barracuda Networks Inc. (NYSE:CUDA), JetBlue Airways Corporation (NASDAQ:JBLU), and BJ’s Restaurants, Inc. (NASDAQ:BJRI), while the ETF is the Vanguard MSCI EAFE ETF (NYSEARCA:VEA).
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Procter & Gamble Corporation (NYSE:PG) is one of the world’s largest consumer product companies with over 100 manufacturing sites in approximately 40 countries, and owns some of the best-known consumer brands such as such as Olay, Old Spice, Safeguard, Head & Shoulders, Pantene, and Charmin. The short interest in the company’s shares fell sharply in the second-half of October, by 63% to total just 1.3% of the float. It fell by another 6.7% in the first-half of November to cover just 32.50 million shares, or 1.2% of the float. Shares of PG have returned over 13% in the last year. The company reported better-than-expected fiscal first-quarter results recently, including net profits of $1.03 per share, compared to analysts’ expectations of $0.98. It also reported a 3% growth in organic sales, beating the 2% increase expected by the market. Procter & Gamble Corporation (NYSE:PG) is nearing the end of its restructuring program in which it has sold off many non-essential brands and products and has now started another $10 billion cost-cutting program. 71 hedge funds in our system held $20.09 billion worth of PG shares at the end of September, with the value of their holdings increasing by a whopping 263% quarter-over-quarter as several hedge funds initiated billion-dollar positions in the stock during Q3.
The short interest in Barracuda Networks Inc. (NYSE:CUDA) fell sharply in the second-half of October, by 35%, followed by a 13% decline in the first-half of November. Just 806,792 shares are short now, or 2.7% of the float. The stock is currently trading fairly close to its 52-week high of $26.60. Barracuda Networks Inc. (NYSE:CUDA) has a total market capitalization of $1.3 billion, with institutions owning 61% of the outstanding shares of the company. The technology company provides security and data protection solutions, with its security solutions including Barracuda Email Security, The Barracuda Web Security Gateway, Barracuda NextGen Firewalls, and Barracuda Web Application Firewall. The value of hedge funds’ holdings in the stock declined by almost 18% to $55 million quarter-over-quarter by the end of the third quarter, despite shares of the company soaring by over 60% during the quarter, so a lot of hedge funds appear to have taken the money and run.
We’ll check out three more stocks with falling short interest on the next page.
JetBlue Airways Corporation (NASDAQ:JBLU) is a low-cost U.S air carrier with a market value of $6.8 billion. The airline’s stock saw a sharp decline of 40% in its short interest in the second-half of October, but short interest jumped by 32.6% in the first-half of November to cover 3.5% of the float. The number of shares sold by short sellers stands at 11.24 million as of November 15. The company reported a 6.5% year-over-year growth in consolidated revenue passenger miles (RPM) during October. By the end of the third quarter, 32 funds that we track held JBLU shares worth $486.89 million.
BJ’s Restaurants, Inc. (NASDAQ:BJRI) is a small-cap restaurant company whose shares experienced sharp short covering in the second-half of October. The short interest ratio declined by 39% during that time, with days to cover falling to just 1.7 days. In the following half-month, short interest jumped by 13%, while days to cover moved up to 4. Overall, 6.6% of the float is sold short as of November 15. The company owns and operates over 170 restaurants located in over 20 states. The main brands owned by the company are BJ’s Restaurant & Brewery, BJ’s Restaurant & Brewhouse, BJ’s Pizza & Grill, and BJ’s Grill. The company reported poor third-quarter results, with earnings falling by 23% from a year earlier due to lower operating margins. 11 out of the 16 analysts covering the stock have it rated ‘Hold’, while only 3 analysts think it is worthy of a ‘Buy’ rating. 20 funds in our database held 23% of the company’s float as of September 30.
Lastly is the Vanguard MSCI EAFE ETF (NYSEARCA:VEA) provides exposure to equity markets in Europe and the Pacific region to its investors. The ETF has a portfolio of more than 1,100 stocks from 21 countries, with about 22% of its portfolio funds being allocated to Japan, while the U.K is the next-largest region with 17% allocation. Amongst sectors, Financials is the ETF’s biggest sector, followed by Industrials and Consumer Cyclicals. The most remarkable thing about the ETF is its very low expense ratio of just 0.09%, making it an excellent vehicle to gain exposure to non-U.S developed markets in Europe and Asia. The ETF saw a very sharp fall in its short interest in the last half of October, falling by 57% as short sellers rushed to cover their positions. However, short interest surged by 94.2% in the first-half of November, as Trump’s Presidential victory clearly spooked investors when it comes to foreign equities. At the end of the third quarter, eight hedge funds tracked by Insider Monkey owned more than $65 million worth of the ETF’s shares.