Short interest in Baker Hughes
Short interest in Baker Hughes’s (BHI) stock as a percentage of its float is 2.3% as of October 12 compared to 1.3% as of June 30. Since the end of 2Q16, short interest in BHI’s stock has risen 78%. As noted in the graph below, BHI’s share price and short interest as a percentage of float have been inversely related in the past three years. Baker Hughes makes up 0.03% of the iShares Core Growth Allocation ETF (AOR). Equity assets make up 62% of AOR, while fixed income assets make up 38% of AOR.
Short interest and share price
Short interest is the number of shares sold short divided by the number of shares outstanding. A rise in short interest as a percentage of float, or a rise in short interest, indicates that more investors expect the stock’s price to fall. Despite the increase in short interest, BHI’s share price has risen 16% since June 30. Since June 30, BHI’s smaller market cap peer Precision Drilling’s (PDS) share price has fallen 10%.
However, investors should note that the market could go against investors’ sentiment. Also, the share price could increase when investors start buying the stock to cover their short positions. Energy stocks are typically correlated with crude oil prices. Has BHI’s correlation with crude oil price increased? Let’s find this out in the following part of the series.