Illinois Tool Works’ short interest

The latest short interest report on November 30 indicated that Illinois Tool Works’ (ITW) short interest has declined marginally from its highest point in 2018, which it reached as of November 2.

According to the report, Illinois Tool Works’ short interest was 1.42% of its outstanding shares—compared to 1.56% as of November 2. The lower short interest suggests a decline in the negative sentiments toward the stock.

Why Is Illinois Tool Works’ Short Interest Declining?

Illinois Tool Works has recovered from its 2018 lows. However, the stock has continued its downward trend. On a year-to-date, the stock has declined close to 25%. Illinois Tool Works reported better-than-expected third-quarter earnings and maintained its guidance for fiscal 2018. However, the company is facing challenges due to unfavorable foreign currency, increased raw material prices, and sluggish top-line growth.

Many analysts have lowered Illinois Tool Works’ target price. With Illinois Tool Works declining close to 25%, investors might look to recover some of their short position, which might make the stock prices go up.

Short interest ratio

Illinois Tool Works’ short interest is ~4.7 million shares. The company’s average trading volume is ~1.82 million shares. As a result, the short interest ratio is ~2.6x, which indicates that it would require three days to cover all of the short positions in the stock. Let’s look at the short interest ratios of Illinois Tool Works’ peers:

  • Honeywell’s (HON) short interest is ~5.87 million, while its average number of shares traded is 3.39 million. Honeywell’s short interest ratio is ~1.7x, which indicates that it will take two days to cover the short positions in the stock.
  • General Electric’s (GE) short interest is 135.06 million. General Electric’s average number of shares traded is 134.37 million, which indicates that it will take one day to cover the short positions in the stock.
  • Caterpillar’s (CAT) short interest ratio stands at 1.2x, which means that it will take one day to cover the short positions in the stock.

Investors who are interested in holding Illinois Tool Works indirectly could consider the SPDR S&P Dividend ETF (SDY), which holds 1.2% in Illinois Tool Works as of December 20.

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