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Shares shorted is a helpful indicator for the sentiment surrounding a stock – when a stock sees decreases in the number of shares shorted, it is a sign that fewer investors are bearish on the company.

We ran a screen on stocks from the healthcare sector for those that have seen significant decreases in shares shorted month-over-month. We then screened for those that appear undervalued to earnings growth, with PEG below 1.

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



We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

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Do you agree with the bullish outlook on these companies? Use this list as a starting point for your own analysis.

List sorted by decrease in shares shorted as a percent of share float.

1. Amedisys Inc. (NASDAQ:AMED): Provides home health and hospice services including practical nursing services and physical and occupational therapy. Market cap of $454.70M. PEG at 0.44. Shares shorted have decreased from 5.74M to 3.98M month-over-month, a change representing 6.14% of the company's 28.65M share float. The stock is a short squeeze candidate, with a short float at 13.82% (equivalent to 7.37 days of average volume). It has been a rough couple of days for the stock, losing 5.36% over the last week.

2. China Medical Technologies Inc. (CMED):
Develops, manufactures and markets immunodiagnostic and molecular diagnostic products. Market cap of $163.61M. PEG at 0.49. Shares shorted have decreased from 6.32M to 5.80M month-over-month, a change representing 3.16% of the company's 16.44M share float. The stock is a short squeeze candidate, with a short float at 18% (equivalent to 16.26 days of average volume). It has been a rough couple of days for the stock, losing 11.21% over the last week.

3. Lincare Holdings Inc. (NASDAQ:LNCR):
Provides oxygen and other respiratory therapy services to the home healthcare market in the United States. Market cap of $1.94B. PEG at 0.70. Shares shorted have decreased from 9.85M to 7.28M month-over-month, a change representing 2.88% of the company's 89.34M share float. Offers a good dividend, and appears to have good liquidity to back it up - dividend yield at 3.85%, current ratio at 2.25, and quick ratio at 2.16. The stock has lost 5.33% over the last year.

4. Masimo Corporation (NASDAQ:MASI):
Develops, manufactures and markets noninvasive patient monitoring products worldwide. Market cap of $1.38B. PEG at 0.98. Shares shorted have decreased from 7.48M to 5.94M month-over-month, a change representing 2.83% of the company's 54.40M share float. The stock is a short squeeze candidate, with a short float at 10.88% (equivalent to 9.65 days of average volume). The stock has lost 10.42% over the last year.

5. AMERIGROUP Corporation (AGP):
Operates as a multi-state managed healthcare company. Market cap of $2.21B. PEG at 0.66. Shares shorted have decreased from 4.78M to 3.49M month-over-month, a change representing 2.66% of the company's 48.46M share float. It has been a rough couple of days for the stock, losing 9.57% over the last week.

6. Bio-Reference Laboratories Inc. (NASDAQ:BRLI):
Provides clinical laboratory testing services for the detection, diagnosis, evaluation, monitoring and treatment of diseases primarily in the greater New York metropolitan area. Market cap of $538.88M. PEG at 0.84. Shares shorted have decreased from 7.17M to 6.59M month-over-month, a change representing 2.34% of the company's 24.75M share float. The stock is a short squeeze candidate, with a short float at 26.63% (equivalent to 22.96 days of average volume). It has been a rough couple of days for the stock, losing 5.54% over the last week.

7. NuVasive, Inc. (NASDAQ:NUVA):
Engages in the design, development and marketing of minimally disruptive surgical products and procedures for the spine. Market cap of $835.70M. PEG at 0.61. Shares shorted have decreased from 7.39M to 6.74M month-over-month, a change representing 1.64% of the company's 39.72M share float. The stock is a short squeeze candidate, with a short float at 16.97% (equivalent to 6.22 days of average volume). It' has been a rough couple of days for the stock, losing 7.14% over the last week.

8. Molina Healthcare Inc. (NYSE:MOH): Provides Medicaid-related solutions to meet the healthcare needs of low-income families and individuals, as well as assists state agencies in their administration of the Medicaid program. Market cap of $789.64M. PEG at 0.57. Shares shorted have decreased from 2.38M to 1.93M month-over-month, a change representing 1.57% of the company's 28.63M share float. It's been a rough couple of days for the stock, losing 8.78% over the last week.

9. Conceptus, Inc. (NASDAQ:CPTS): Designs, develops and markets minimally invasive devices for reproductive medical applications primarily in the United States, France and Europe. Market cap of $311.78M. PEG at 0.23. Shares shorted have decreased from 2.68M to 2.26M month-over-month, a change representing 1.36% of the company's 30.90M share float. The stock is a short squeeze candidate, with a short float at 7.32% (equivalent to 6.48 days of average volume). The stock has lost 28.87% over the last year.

10. Universal Health Services Inc. (NYSE:UHS): Operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers. Market cap of $3.70B. PEG at 0.96. Shares shorted have decreased from 2.79M to 1.62M month-over-month, a change representing 1.31% of the company's 89.14M share float. It has been a rough couple of days for the stock, losing 6.87% over the last week.

11. Community Health Systems, Inc. (NYSE:CYH): Provides healthcare services through the operation of hospitals in the United States. Market cap of $1.65B. PEG at 0.44. Shares shorted have decreased from 5.24M to 4.16M month-over-month, a change representing 1.24% of the company's 86.97M share float. It has been a rough couple of days for the stock, losing 10.31% over the last week.

*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.