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Which Utility Stocks Lead in Short Interest?

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NRG Energy

On November 8, 2016, NRG Energy (NRG) had a short interest-to-equity float ratio of 5.1%—the highest among the utility stocks that make up the Utilities Select Sector SPDR ETF (XLU). One month ago, the ratio was 5.1%. Three months ago, it was 5.4%.

In the last three months, the stock has fallen 10.6%—the most among the utility stocks in the above table. NRG Energy’s short interest-to-equity float ratio fell 5.6% during this period.

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As we learned in the first part of this series, NRG Energy is also the utility stock with the highest implied volatility. Apart from the sharp fall in the stock’s price, its relatively high short interest could 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. It can cause a 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 3.8%. Three months ago, it was 3.6%. In the last three months, the stock has risen 0.7%, while its short interest-to-equity float ratio has risen 19.2%. SCANA’s net debt-to-EBITDA ratio is 4.3x. Its cash and cash equivalents were $176 million in 2Q16.

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NiSource

NiSource’s (NI) short interest-to-equity float ratio is 3.7%. One month ago, it was 3.6%. Three months ago, it was 2.6%. 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 fell 9.3%, while its short interest-to-equity float ratio rose 43.3%.

WEC Energy

WEC Energy’s (WEC) short interest-to-equity float ratio is 3.4%. One month ago, it was 3.5%. Three months ago, it was 3.0%. In the last three months, the stock fell 5.6%. Its short interest-to-equity float ratio rose 16.7%. 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 3.6%. Its net debt-to-EBITDA ratio is 4.8x. Its cash and cash equivalents were $403 million in 2Q16. CMS Energy fell 3.8% in the last three months, while its short interest-to-equity float ratio fell 11%.

Generally, the short interest trend in a stock and its price are inversely related and 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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