Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message|
( followers)  

When considering stocks, it's always helpful to gauge what the rest of the market thinks. One source of sentiment is the number of shares shorted. Companies seeing significant increases in shares shorted are being viewed more negatively, and vice-versa.

We ran a screen on the healthcare sector for stocks seeing the most significant decreases in shares shorted month-over-month. This indicates that a growing number of short sellers are no longer bearish on these names.

We wanted to research at least one possible fundamental signal for this change in sentiment.

We looked through financials of close to 10 companies for those with strong sales trends, comparing growth in revenue to growth in accounts receivable. Since accounts receivable is the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables, the healthier the company's revenue.

We screened for stocks seeing faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.

Do you think short sellers are betting on improving top-line growth?

The List

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.

Use this list as a starting point for your own analysis.

1. Abiomed Inc. (NASDAQ:ABMD): Engages in the research, development, and sale of medical devices that provide circulatory support to acute heart failure patients across the continuum of care in heart recovery.

  • Market cap at $541.38M, most recent closing price at $14.04.
  • Shares shorted have decreased from 8.59M to 7.61M over the last month, a decrease which represents about 2.88% of the company's float of 34.05M shares. Days to cover ratio at 8.52 days.
  • Revenue grew by 18.79% during the most recent quarter ($38.25M vs. $32.2M y/y). Accounts receivable grew by 15.09% during the same time period ($19.91M vs. $17.3M y/y). Receivables, as a percentage of current assets, decreased from 17.66% to 16.32% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).

2. Herbalife Ltd. (NYSE:HLF): Sells weight management, nutritional supplement, energy, sports and fitness, and personal care products worldwide.

  • Market cap at $3.89B, most recent closing price at $36.0.
  • Shares shorted have decreased from 37.30M to 35.83M over the last month, a decrease which represents about 1.51% of the company's float of 97.23M shares. Days to cover ratio at 3.9 days.
  • Revenue grew by 13.59% during the most recent quarter ($1,016.89M vs. $895.22M y/y). Accounts receivable grew by 1.5% during the same time period ($114.16M vs. $112.47M y/y). Receivables, as a percentage of current assets, decreased from 15.33% to 12.34% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).

3. Molina Healthcare Inc. (NYSE:MOH): Provides Medicaid-related solutions to meet the health care needs of low-income families and individuals, as well as assists state agencies in their administration of the Medicaid program.

  • Market cap at $1.52B, most recent closing price at $32.61.
  • Shares shorted have decreased from 1.72M to 1.44M over the last month, a decrease which represents about 1% of the company's float of 27.97M shares. Days to cover ratio at 2.8 days.
  • Revenue grew by 20.83% during the most recent quarter ($1,578.57M vs. $1,306.41M y/y). Accounts receivable grew by -16.65% during the same time period ($149.68M vs. $179.58M y/y). Receivables, as a percentage of current assets, decreased from 17.13% to 11.09% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).

*Short data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 3 Healthcare Stocks With Bullish Short Trends