Market Overview

Short Interest In American Waterworks And Duke Energy Doubles

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  • Short interest in a number of stocks surged in the most recent settlement period.
  • A water utility and an electric utility were among those leading that trend in early March.
  • Shares of both of them rose in the period, as did the broader markets.

As the markets seemed to find their footing after a rough start to the year and many stocks finally started to head north again, what caught the eye of short sellers? Leading utilities American Water Works Company Inc (NYSE: AWK) and Duke Energy Corp (NYSE: DUK) each saw the number of their shares sold short more than double between the February 29 and March settlement dates. One just joined the S&P 500 and the other has a pending acquisition.

Of course, they were not alone in seeing a short interest surge in the first weeks of this month. Others include Carmike Cinemas, Fifth-Third Bancorp, Goldcorp, H&R Block and Pfizer. On the other hand, short sellers fled from the likes of Fortress Investment Group and Tumi in that time.

Here we take a quick look at how American Water Works and Duke Energy have fared recently and what analysts expect from them.

American Water Works

This New Jersey-based provider of water and wastewater services in the United States and Canada saw its short interest spike more than 140 percent to around 7.59 million shares, or 4.3 percent of float, in the first weeks of the month. That was the greatest number of shares short in at least a year. It would take more than a day to cover all short positions.

Though the company joined the S&P 500 during the period, it saw a downgrade based on valuation. The consensus analyst recommendation remains to buy the shares, though their mean price target is now less than the current share price. That suggests the analysts see no further upside at this time.

Short sellers watched shares rise almost 6 percent during the two-week short interest period, though almost all of the gain came in the first couple of days. While the stock climbed another 2 percent afterward, it has given up that gain. The share price is still up more than 13 percent year-to-date.

See also: The Exelon-Pepco Merger Approval Was 'Quite Unexpected'

Duke Energy

The number of shares sold short in this North Carolina-based electric utility jumped about 109 percent during the two weeks to nearly 20.66 million. While that was 3 percent of the total float, it was also the highest level of short interest since April of last year. The days to cover rose to more than four.

Early this month, Duke announced a stock offering to help pay for the pending acquisition of Piedmont Natural Gas. Here, the consensus analyst recommendation remains to hold the shares. And here too the current share price has overrun the analysts' mean price target, suggesting no further upside.

During the settlement period, shares rose about 5 percent, outperforming the S&P 500. They have climbed more than 2 percent more since, hitting a new 52-week high, but the stock has plateaued in the past week. Duke Energy shares are still up more than 11 percent year-to-date.

At the time of this writing, the author had no position in the mentioned equities.

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Posted-In: American water works duke energyShort Ideas Trading Ideas

 

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