This coming week is traditionally the annual Santa Claus rally. This is a time when oversold stocks can potentially make for very profitable trades, especially among ones that have extra large short interest. Profit taking works in both directions, and shorts will often take their profits and cover during this time. With the fears of the fiscal cliff still looming, medical stocks can provide some perceived safety as they are largely less affected by the economy than companies in many other industries.
I performed a screen search for oversold medical equipment and biotech stocks that fell between 6% and 10% last week. By limiting it to under 10%, this filters out many of the stocks that had bad fundamental news since usually if a medical stock sells off that severely, there's usually a fundamental reason for it. I then further filtered down my search to only stocks with a short ratio over 5 and eliminated the ones with low volume (under 300k shares average). There are 5 stocks that resulted from my screen. Use this list only as a mere first step for possible ideas warranting further research. They are sorted from largest to smallest short interest ratio.
(1) Exelixis (EXEL) engages in developing small molecule therapies for the treatment of cancer. Its focuses on developing cabozantinib product candidate that inhibits MET, VEGFR2, and RET proteins, which are key drivers of tumor growth, vascularization, and/or metastasis. The cabozantinib product is in Phase III clinical trial for the treatment for medullary thyroid cancer. The company also engages in various clinical programs for cabozantinib focused on the treatment of metastatic castration-resistant prostate cancer, ovarian cancer, melanoma, breast cancer, non-small cell lung cancer, hepatocellular cancer, renal cell carcinoma, and thyroid cancer. EXEL fell 8.2% this week closing Friday at $4.59 per share. A director purchased shares several times in the open market despite the sell-off. It has a short ratio of 12.4 and short interest of 40.6 million shares.
(2) Globus Medical (GMED) focuses on the design, development, and commercialization of products that promote healing in patients with spine disorders. It offers approximately 100 innovative fusion and disruptive technology products that address an array of spinal pathologies, anatomies, and surgical approaches. The company's innovative fusion products are used in cervical, thoracolumbar, sacral, and interbody/corpectomy fusion procedures to treat degenerative, deformity, tumor, and trauma conditions. Its disruptive technology products provide material improvements to fusion procedures, such as minimally invasive surgical techniques, as well as new treatment alternatives, which include motion preservation technologies, such as dynamic stabilization, total disc replacement and interspinous process spacer products, and advanced biomaterials technologies. GMED fell 9.8% this week closing Friday at $10.97 per share on worries voiced by Jim Cramer that GMED faces a lockup expiration, spine segment decline, and profit margin decline. There was no fundamental news to cause the sell-off. It has a short ratio of 12.4 and short interest of 2.4 million shares.
(3) Intuitive Surgical (ISRG) designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Its da Vinci surgical system consists of a surgeons console or consoles, a patient-side cart, a 3-D vision system, Firefly fluorescence imaging product, da Vinci skills simulator, and proprietary wristed instruments. ISRG fell 7.7% this week closing Friday at $496.76 per share after an attack by short-selling website Citron Research gave low opinion-based price targets of $450 short-term and $350 long-term. There was no fundamental news to cause the sell-off. It has a short ratio of 12.2 and short interest of 2.9 million shares.
(4) Amarin Corporation (AMRN) focuses on developing the treatment for cardiovascular disease in the field of lipid science. Its lead product candidate includes AMR101, a prescription-only omega-3 fatty acid comprising icosapent ethyl, or ethyl-EPA for the treatment of patients with very high triglyceride levels and high triglyceride levels or hypertriglyceridemia. AMRN fell 9.96% this week finishing off Friday at $7.96 per share following disappointment that AMR101 failed to get NCE (New Chemical Entity) status from the FDA. But given this once-a-month chance hasn't been successful for 5 months in a row and could still happen again in the future, this was not exactly earth-shattering shocking news. It has a short ratio of 5.2 and short interest of 20.6 million shares.
(5) BioDelivery Sciences International (BDSI) focuses on developing and commercializing therapeutics in the areas of pain management and oncology supportive care. The company uses its patented BioErodible MucoAdhesive (BEMA) drug delivery technology that consists of a small, bi-layered erodible polymer film for application to the buccal mucosa in the development of its products. BDSI fell 8.6% this week finishing off Friday at $4.05 per share following news of hiring a new Senior Vice President & General Counsel. There was no fundamental news causing the sell-off, but the shares may be still having a hangover from the company's equity raise almost a month ago. It has a short ratio of 5.2 and short interest of 1.2 million shares.