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Why Is Toronto-Dominion Bank the Top TSX Short-Selling Stock?

Canada is known for the strength and stability of its Big Five banks, so it’s rather surprising to see one of them top the TSX short seller for November. Toronto-Dominion Bank (TSX:TD)(NYSE:TD) currently tops the short-sale list. Why?

First, let’s look at the numbers.

TD tops the list

The TSX reports its top short-selling stocks twice a month. As of the last report on November 30, TD topped the list with 48,666,892 shares currently being short sold. That is an increase of over two million from TD’s November 15th short position of 46,390,758 shares. It’s interesting to note that TD is not the only bank or financial company on the list. Bank of Nova Scotia sits at 11th place.

What helped put TD at the top?

Some of the issues that might be worrying investors aren’t necessarily specific to TD. There has long been speculation about a housing price correction coming to the Canadian market, which makes some people leery about companies that make so much of their money from mortgages. Fool contributor Matt Smith discussed this issue in August. His article also tells us TD being on the top short-seller list is nothing new. People have been calling for a housing correction for years, and our regulators have been trying to tweak mortgage rules to cool the housing market, although nothing seems to keep it down for long.

What may have put TD over the top last month was its fourth-quarter earnings release. TD missed analyst expectations of $1.39 per share, coming in at $1.36. Fool contributor David Jagielski discussed the results in depth. Even though the earnings were a miss, the company posted good overall results that beat the Q4 2016 results.

TD’s stock price has also spiked since September, when it was down in the $64 range. It dipped when its earnings were released, but it’s up overall in the $72 range. It’s possible that investors simply feel the price is due for a regular correction, since it’s been on an upward trend.

Bottom line

Does TD topping the short-seller list mean you shouldn’t buy or hold it? No. Just because one group of people believe the stock is due for a price correction doesn’t make them right. And even if they are right, no one knows when a price correction will happen with any certainty. TD still has good results and offers a quality dividend. Its price has gone up and down over the decades, but its investors still come out ahead.

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Fool contributor Susan Portelance has no position in any stocks mentioned.


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