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Why Did Baker Hughes’s Short Interest Increase?

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Jan. 12 2017, Updated 10:36 a.m. ET

Short interest in Baker Hughes

The short interest in Baker Hughes (BHI) stock as a percentage of its float was 2.3% as of January 10—compared to 1.8% as of September 30. Since the end of 3Q16, the short interest in Baker Hughes stock rose 26%. As noted in the following graph, Baker Hughes’s share price and short interest as a percentage of float have been inversely related in the past three years. Baker Hughes accounts for 0.04% of the iShares Core Growth Allocation ETF (AOR). Equity assets make up 61% of AOR, while fixed income assets make up 39% of AOR.

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Short interest and stock 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, Baker Hughes’s share price has risen 25% since September 30, 2016.

Short interest in Baker Hughes’s peers

Since September 30, Baker Hughes’s smaller market cap peer McDermott International’s (MDR) stock price has risen 46%. Core Laboratories’ (CLB) stock price rose 11%, while Halliburton’s (HAL) stock price rose 25% since September 30, 2016.

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 Baker Hughes’s correlation with crude oil prices increased? We’ll discuss this in the next part.

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