uploads/2018/06/Part-4-Short-interest-1.png

What Honeywell’s Short Interest Trend Suggests

By

Updated

Honeywell’s short interest

Previously, we saw analysts’ recommendations for Honeywell (HON). In this part, we’ll look at Honeywell’s short interest trends. As of May 31, Honeywell’s short interest had increased by five basis points sequentially, from 0.92% to 0.97%, while its stock price had risen from $147.35 to $147.91.

The increase in HON’s short interest reflects a negligible rise in bearishness toward the stock. However, its short interest as a percentage of outstanding shares is still under 1%, and it was 1.3% at the beginning of this year, indicating bearishness toward the stock has declined in that time.

Why is HON’s short interest falling?

Although Honeywell stock has declined this year from its all-time high of $165, bearishness toward the stock has not increased, because of its UOP[1.formerly Universal Oil Products] and aerospace businesses driving strong earnings growth in Q1 2018. All of its reporting segments have grown, and its planned spin-offs have progressed, reducing bearishness.

Honeywell’s and peers’ short interest ratios

On June 14, Honeywell’s short interest was ~7.3 million shares, and its average trading volume was ~2.6 million shares, meaning its short interest ratio was ~2.8x. This ratio indicates it would require almost three days to cover all short positions. Industrial peers’ short interest ratios as of June 14 were as follows:

  • 3M’s (MMM) short interest was 7.7 million shares, and its average number of shares traded was 2.9 million, meaning its short interest ratio was ~2.7x—it would take almost three days to cover all short positions.
  • General Electric’s (GE) short interest was 146 million shares, and its average number of shares traded was 67.6 million, meaning it would take two days to cover all short positions.
  • Caterpillar’s (CAT) short interest ratio was ~1.8x, meaning it would take nearly two days to cover all short positions.

Investors can indirectly hold Honeywell through the iShares US Industrials ETF (IYJ), of which HON comprised 3.3% as of June 14.

More From Market Realist