We recently compiled a list of the 8 Dividend Giants with Lowest Short Interest in 2024. In this article, we are going to take a look at where Bristol-Myers Squibb Company (NYSE:BMY) stands against the other dividend giants with lowest short interest.
Short sellers have faced significant challenges over the past few years, as the market’s ongoing rally has not been favorable to them, with 2023 being no exception. According to S3 Partners Research, investors betting against US and Canadian stocks incurred paper losses totaling $194.9 billion last year due to a sharp market rally. The report highlighted that 2023 was a particularly tough year for short sellers, with tech stocks soaring 43.4% and the broader market rising 24.2%. Despite the difficulties, some investors managed to profit from short positions, particularly during the banking crisis in March last year.
Short selling is a common and regulated investment strategy that investors use when they believe a stock is overpriced based on their research. It enhances market liquidity, contributes to market stability, and helps both investors and companies manage risk in their portfolios.
Short selling isn’t just used for excitement; it plays a key role in improving price accuracy, ensuring more efficient capital allocation, preventing financial bubbles, and revealing fraud. According to a report by the Washington-based Managed Funds Association, short selling signaled that the US housing market was overvalued in 2008, helping to limit the broader impact of the financial crisis. The report also mentioned that over the past two decades, short selling has exposed numerous corporate frauds, including cases like Enron, Tyco, Worldcom, MBIA, Insys Therapeutics, Valeant, and Wirecard, among others.
In August, short sellers focused their attention on airlines due to increasing concerns about the sector, which has been experiencing declines in earnings and rising costs, according to a report from data and technology firm Hazeltree. Some investors and analysts believe that the airline industry, which is cyclical and closely linked to macroeconomic conditions, may be heading for another downturn as travel demand normalizes after COVID-19 and consumers become more sensitive to pricing. The Hazeltree report also noted that traders made bets against banks during the same month.
Short sellers have clearly identified opportunities in neglected or struggling segments of the market. Last year, the instability among regional banks drew the attention of short sellers, who examined these lenders’ balance sheets for weaknesses related to rising interest rates and took positions against their stocks. In 2023, while the overall market was on an upward trend, this sector proved to be particularly lucrative for these traders. The volatility experienced by regional bank stocks earlier this year once again led to significant paper profits for short sellers, mirroring the gains achieved during last year’s disruptions in the sector. As a result, analysts are reassessing their view of short sellers. Carson Block, founder of Muddy Waters Research, believes that markets are increasingly reliant on short sellers. However, he pointed out that ongoing stock rallies and emerging regulatory hurdles are posing challenges for bearish investors, making it harder for them to secure capital. With this, we will take a look at some dividend giants with the lowest short interest.
Our Methodology:
To create this list, we used the Finviz stock screener to find dividend stocks with a market capitalization of at least $10 billion and dividend yields exceeding 3% as of September 22. We then narrowed down the selection to stocks with less than 3% of their float sold short, using data from Yahoo Finance recorded on September 22. The stocks are arranged in descending order based on their short interest rates.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A pharmacy shelves stocked with pharmaceutical drugs awaiting distribution.
Bristol-Myers Squibb Company (NYSE:BMY)
Short % of Float as of September 22: 1.10%
Bristol-Myers Squibb Company (NYSE:BMY) is an American pharmaceutical company that specializes in innovative medicines and therapies for patients with serious illnesses. The company has a strong dividend history, having raised its payouts for 18 consecutive years. The company’s strong cash flow has enabled it to steadily increase its dividends for nearly two decades. Its trailing twelve-month operating cash flow is $14.1 billion and its levered free cash flow for the period is $15.7 billion. Currently, it pays a quarterly dividend of $0.60 per share and has a dividend yield of 4.74%, as of September 22.
Earlier this year, Bristol-Myers Squibb Company (NYSE:BMY) completed a $14 billion acquisition of Karuna Therapeutics and its experimental psychosis treatment, KarXT. However, the stock dropped after the company took a $12.9 billion charge for in-process research and development in the first quarter related to the acquisition. Since the start of 2024, the stock is down by a little over 4%, as of the close of September 22.
Despite this, Bristol-Myers Squibb Company (NYSE:BMY) still shows significant growth potential. In Q2 2024, the company reported $12.2 billion in revenue, a 9% increase from the same period last year. Its Growth and Legacy portfolios drove a 13% year-over-year increase in U.S. revenue to $8.8 billion. The company’s development pipeline includes five experimental drugs in late-stage clinical trials. With numerous growth drivers in place and several products already commercialized, BMY is well-positioned to sustain steady cash flow.
Of the 912 hedge funds tracked by Insider Monkey at the end of Q2 2024, 61 funds owned stakes in Bristol-Myers Squibb Company (NYSE:BMY), up from 57 in the previous quarter. These stakes are worth over $2.5 billion in total. With over 14 million shares, Pzena Investment Management was the company’s leading stakeholder in Q2.
Overall BMY ranks 2nd on our list of dividend giants with lowest short interest in 2024. While we acknowledge the potential BMY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BMY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.