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When considering stocks, it's always helpful to gauge what the rest of the market thinks. With this in mind, we screened the healthcare sector for two bullish indicators.

First, we screened for healthcare stocks seeing the most significant increase in short covering. That is to say that the numbers of shares shorted have decreased significantly month-over-month.

Next, we screened for those with bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform into the future.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

Do you think institutions are correct in buying these healthcare stocks? Short sellers seem to think so.

Use this list as a starting point for your analysis.

1. Affymax, Inc. (OTCPK:AFFY): Engages in the development of drugs for the treatment of serious and life-threatening conditions. Market cap at $920.7M, most recent closing price at $24.77. Net institutional purchases in the current quarter at 1.6M shares, which represents about 5.% of the company's float of 31.97M shares. Shares shorted have decreased from 4.92M to 4.22M over the last month, a decrease that represents about 2.19% of the company's float of 31.97M shares. Days to cover ratio at 5.01 days.

2. Genomic Health Inc. (NASDAQ:GHDX): Focuses on the development and global commercialization of genomic-based clinical laboratory services that analyze the underlying biology of cancer, allowing physicians and patients to make individualized treatment decisions. Market cap at $867.46M, most recent closing price at $28.21. Net institutional purchases in the current quarter at 1.5M shares, which represents about 9.09% of the company's float of 16.51M shares. Shares shorted have decreased from 2.69M to 2.38M over the last month, a decrease that represents about 1.88% of the company's float of 16.51M shares. Days to cover ratio at 9.78 days.

3. Incyte Corporation (NASDAQ:INCY): Focuses on the discovery and development of proprietary small molecule drugs for hematologic and oncology indications, and inflammatory and autoimmune diseases. Market cap at $2.35B, most recent closing price at $17.93. Net institutional purchases in the current quarter at 5.9M shares, which represents about 5.14% of the company's float of 114.70M shares. Shares shorted have decreased from 20.85M to 18.42M over the last month, a decrease that represents about 2.12% of the company's float of 114.70M shares. Days to cover ratio at 13.57 days.

4. Infinity Pharmaceuticals, Inc. (NASDAQ:INFI): Engages in the discovery and development of medicines for the treatment of cancer and other conditions in the United States. Market cap at $977.52M, most recent closing price at $24.76. Net institutional purchases in the current quarter at 8.7M shares, which represents about 39.28% of the company's float of 22.15M shares. Shares shorted have decreased from 2.82M to 2.10M over the last month, a decrease which represents about 3.25% of the company's float of 22.15M shares. Days to cover ratio at 4.96 days.

5. MAP Pharmaceuticals, Inc. (NASDAQ:MAPP): Focuses on the development and commercialization of inhalation therapies for patients suffering from migraines. Market cap at $564.64M, most recent closing price at $16.0. Net institutional purchases in the current quarter at 3.9M shares, which represents about 13.12% of the company's float of 29.72M shares. Shares shorted have decreased from 4.90M to 4.53M over the last month, a decrease that represents about 1.24% of the company's float of 29.72M shares. Days to cover ratio at 16.71 days.

Institutional data sourced from Fidelity, short data sourced from Yahoo Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

Source: Hedge Funds Are Buying These 5 Healthcare Stocks With Heavy Short Covering