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Utility Stocks That Lead in Short Interest

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Nov. 20 2020, Updated 12:42 p.m. ET

NRG Energy

On October 26, 2016, NRG Energy (NRG) had a short interest-to-equity float ratio of 5.1%, the highest among the utility stock companies that make up the Utilities Select Sector SPDR ETF (XLU). One month ago, this ratio was 4.7%. Three months ago, it was 5.9%.

In the last three months, the stock has fallen 24.7%—the most among the utility stocks in the table above. NRG’s short interest-to-equity float ratio has fallen 13.4% during this period.

As we saw in the first part of this series, NRG Energy is also the utility stock with the highest implied volatility.

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Apart from the sharp fall in the stock’s price, the relatively high short interest in NRG Energy could also explain why it has one of the highest implied volatilities in the utility sector. While stocks can move wildly as the bulls and bears slug it out, high short interest in a stock implies expectations of a large fall, which can cause the stock’s implied volatility to rise.

NRG Energy’s net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio is 6.5x. Its cash and cash equivalents were $1.8 billion in 2Q16.

SCANA

SCANA’s (SCG) short interest-to-equity float ratio is 4.2%. One month ago, it was 3.7%. Three months ago, it was 4.0%. In the last three months, the stock has fallen 2.3%, while its short interest-to-equity float ratio has risen 7%. SCANA’s net debt-to-EBITDA ratio is 4.3x. Its cash and cash equivalents were $86 million in 1Q16.

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NiSource

NiSource’s (NI) short interest-to-equity float ratio is 3.7%. One month ago, it was 3%. Three months ago, it was 2.9%. Its net debt-to-EBITDA ratio is 5.1x. Its cash and cash equivalents were $28 million in 2Q16. In the last three months, the stock has fallen 10.8%, while its short interest-to-equity float ratio has risen 25.2%.

WEC Energy

WEC Energy’s (WEC) short interest-to-equity float ratio is 3.4%. One month ago, it was 3.6%. Three months ago, it was 3.0%. In the last three months, the stock has fallen 8.1%, and its short interest-to-equity float ratio has risen 13.6%. Its net debt-to-EBITDA ratio is 5.3x. WEC Energy’s cash and cash equivalents were $32.1 million in 2Q16.

CMS Energy

Currently, CMS Energy’s (CMS) short interest-to-equity float ratio is 3.2%. One month ago, it was 3.5%. Three months ago, it was 3.7%. Its net debt-to-EBITDA ratio is 4.8x. Its cash and cash equivalents were $403 million in 2Q16. CMS has fallen 6.8% in the last three months, while its short interest-to-equity float ratio has fallen 12.7%.

Generally, we can see that the short interest trend in a stock and its price are inversely related. Short interest and stock prices tend to move in opposite directions.

CenterPoint Energy’s (CNP) and Duke Energy’s (DUK) short interest-to-equity float ratios are 1.9% and 1.4%, respectively.

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