Short sellers have been building positions in TRV at pace. Yet the options market is sending the opposite signal.
That divergence is the story in The Travelers Companies right now.
Short interest has risen 30.7% over the past month. It now stands at 2.19% of free float — still low in absolute terms, but the rate of accumulation is notable.
The move accelerated after Q1 earnings on April 16. From May 8 to May 15, short shares jumped from roughly 3.93 million to 4.88 million. That's a 24% increase in a single week.
The ORTEX short score has tracked the move, climbing from 31.5 to 33.8 over the past ten days. The bears' thesis centers on personal insurance headwinds. Auto premiums fell 3.9% in Q1. Renewal rates in domestic business lines are softening. Competitive margin pressure is building.
The put/call ratio hit 0.81 on May 18. That's the lowest reading in four weeks. It sits more than two standard deviations below the 20-day mean of 0.89 — a z-score of -2.05.
Traders are actively reducing downside hedges. The 52-week PCR range spans 0.31 to 3.02. At current levels, options positioning is decidedly constructive.
The borrow market is not corroborating the short sellers' urgency. Availability sits at 6,841% — over 103 million shares remain available to borrow. The lending pool is exceptionally loose. Cost to borrow has also eased, falling to 0.33% from a recent high of 0.45%.
Short sellers can access stock easily and cheaply. There is no squeeze dynamic building here.
Post-earnings analyst moves reinforced the constructive view. BMO Capital raised its target to $314. Evercore ISI moved to $321. Keefe, Bruyette & Woods sits at $342 — Outperform on all three. The mean consensus target is $313.74, fractionally above the current price of $305.99.
The bull case rests on net investment income, up 14.3% to $1.03 billion in Q1, and renewal premium growth above 6% in commercial lines.
B of A Securities remains the outlier — Underperform, $257 target.
See the live data behind this article on ORTEX.
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