Top Health Care Short-Squeeze Plays
Updated from 7:09 a.m. EDT
Health care stocks generally have underperformed most other sectors during the last year or two. This underperformance could offer an opportunity for short-squeeze plays from heavily shorted biotechnology, health facilities, pharmaceutical and medical equipment stocks.
A short squeeze takes place when a stock's short-sellers are forced to cover their positions quickly when the stock they are betting against starts climbing on positive news. As the short-sellers are forced to cover, the price of the stock often moves even higher.
The metric for measuring short-squeeze plays is the short ratio, which represents the number of days it would take a stock's short sellers to cover their positions based on the stock's recent average daily trading volume.
Stockpickr has compiled the
Top Health Care Short-Squeeze Plays
, a list of heavily shorted stocks in the sector that have the potential to climb higher on any positive catalyst.
One of the most heavily shorted health care-related stocks is
HealthSouth Corp.
(HLS)
, an inpatient rehabilitation services provider with a short ratio of 40. In 2003, a fraud scheme sent shares plummeting. The company is slated to report its most recent quarterly results on May 7. The stock has a forward price-to-earnings (P/E) ratio of 33 and a P/E-to-growth (PEG) ratio of 6.6.
HealthSouth shares are owned by
, $8.3 billion hedge fund. Highfields also holds shares of
Clear Channel Communications
(CCU) - Get Compania Cervecerias Unidas S.A. Report
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, which has a 3 short ratio,
Qualcomm
(QCOM) - Get QUALCOMM Incorporated Report
, which has a 1.2 short ratio, and
PNC Financial Services
(PNC) - Get PNC Financial Services Group Inc. (The) Report
, with a 3 short ratio.
Another stock with a significant short interest is
Sciele Pharma
( SCRX), a cardiovascular and diabetes pharmaceutical company that has a short ratio of about 18. The company just announced that the Food and Drug Administration has accepted the new-drug application submitted by Addrenex Pharmaceuticals for CloniBID to treat hypertension. Sciele licensed CloniBID from Addrenex for the treatment of hypertension in June 2007. Sciele earlier this week launched a $100 million stock-buyback plan. Sciele has a forward P/E ratio of 8 and a PEG ratio of 0.5.
Sciele appears in the portfolio of the
, which is rated four stars by Morningstar. Stratton also holds shares of
CommScope
(CTV) - Get Innovid Corp. Report
, which has a short ratio of 4,
Anixter International
(AXE) - Get Anixter International Inc. Report
, with a short ratio of 10, and
Terex
(TEX) - Get Terex Corporation Report
, with a 2.4 short ratio.
Prestige Brands
(PBH) - Get Prestige Consumer Healthcare Inc. Report
is another heavily shorted stock, with a short ratio of 21. This distributor of over-the-counter health-care drugs and personal products has scheduled its earnings call for May 15. The stock has a forward P/E ratio of 12 and a PEG ratio of 1.5.
Prestige stock is owned by
, a $5 billion New York hedge fund. Millennium also own shares of
Altria
(MO) - Get Altria Group Inc. Report
, which has a short ratio of 0.9,
NRG Energy
(NRG) - Get NRG Energy Inc. Report
, with a 5.4 short ratio, and
McKesson
(MCK) - Get McKesson Corporation Report
, with a 2.6 short ratio.
For more heavily shorted stocks in the sector, check out the
Top Health-Care Short-Squeeze Plays
at Stockpickr.com.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of
LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for the
Financial Times
and the author of
Trade Like a Hedge Fund
,
Trade Like Warren Buffett
and
SuperCa$h
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
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