T: Insiders vs. Shorts

The most recent short interest data was recently released for the 01/31/2018 settlement date, and AT&T Inc (T) is one of the most shorted stocks of the Russell 3000, based on 6.41 "days to cover" versus the median component at 4.26. There are a number of ways to look at short data, but one metric that we find particularly useful is the "days to cover" because it considers both the total shares short and the average daily volume of shares typically traded. The number of shares short is then divided by the average daily volume, to express the total number of trading days it would take to close out all of the open short positions if every share traded represented a short position being closed.

START SLIDESHOW:
Ten Bargains You Can Buy Cheaper Than The Insiders Did »

In the case of AT&T Inc ( T), the total short interest at the 01/31/2018 settlement date was 183,053,095 shares, which compares to the average daily trading volume of just 28,568,092 shares, for a "days to cover" ratio of 6.41.

When short sellers eventually cover their positions, by definition there must be buying activity because a share that is currently sold short must be purchased to be covered. At the present levels of short interest, if from this point forward every single T share traded represented a short position being closed, then at the average daily volume of 28,568,092 shares it would only be during the 7th trading day that every short position would be closed.

So it would stand to reason that should some unexpectedly good news come out, and short sellers did not have 7 days of patience but instead wanted to cover their short positions very suddenly, that situation could result in sending the stock higher until the higher price produces enough sellers to generate the necessary volume to close out those positions quickly.

AT&T Inc ( T) has something relatively rare for a stock with this much short interest, that being insiders taking the other side of the trade. Looking back over the trailing six month period, T has seen 4 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
10/25/2017 Matthew K. Rose Director 29,600 $33.75 $998,867.50
10/25/2017 Geoffrey Y. Yang Director 29,815 $33.52 $999,258.57
02/05/2018 Richard W. Fisher Director 2,600 $38.10 $99,059.22
02/09/2018 John Donovan CEO-AT&T Communications, LLC 27,997 $35.68 $998,838.24

Below is a chart showing the "days to cover" for T over time:

Loading+chart++2018+TickerTech.com

And looking at the chart below, T's low point in its 52 week range is $32.55 per share, with $42.70 as the 52 week high point — that compares with a last trade of $36.55.

AT&T Inc Moving Averages Chart

In recent trading, shares of AT&T Inc ( T) were changing hands at $36.55/share.

More from Stocks

Is Nvidia Still Tech's Most Explosive Stock? A Bull and Bear Debate

Is Nvidia Still Tech's Most Explosive Stock? A Bull and Bear Debate

Nvidia, Nordstrom, Elon Musk and Google - 5 Things You Must Know

Nvidia, Nordstrom, Elon Musk and Google - 5 Things You Must Know

Stock Futures Edge Lower Amid Disappointing Tech Guidance

Stock Futures Edge Lower Amid Disappointing Tech Guidance

3 Growing Risks That Could Blow Up Your Stock Portfolio Before 2019

3 Growing Risks That Could Blow Up Your Stock Portfolio Before 2019

Why One Strategist Is More Worried About the Strong Dollar Than Turkey's Economy

Why One Strategist Is More Worried About the Strong Dollar Than Turkey's Economy