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One very helpful indicator of the sentiment surrounding a stock is shares shorted. When a company sees a decrease in shares shorted, it indicates that short sellers are less pessimistic on the company – this is referred to as “short covering.”

We ran a screen on stocks from the biotech industry for those seeing short covering, with significant decreases in shares shorted month-over-month.

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.‬

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 (SPY) index over the last month.

(Click chart for more detail)

Do you agree with short sellers’ optimism? Use this list as a starting-off point for your own analysis.

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

1. BioDelivery Sciences International Inc. (BDSI): Focuses on developing and commercializing products in the areas of pain management and oncology supportive care. Market cap of $90.45M. Shares shorted have decreased from 1.21M to 655.68K month-over-month, a change representing 2.49% of the company's 22.30M share float. The stock is currently stuck in a downtrend, trading 60.43% below its SMA20, 62.97% below its SMA50, and 63.54% below its SMA200. The stock has gained 2% over the last year.

2. Immunogen Inc. (IMGN): Engages in the research and development of antibody-based anticancer therapeutics in the United States. Market cap of $866.91M. Shares shorted have decreased from 6.71M to 5.45M month-over-month, a change representing 1.67% of the company's 75.66M share float. The stock has had a couple of great days, gaining 11.27% over the last week.

3. BioMarin Pharmaceutical Inc. (BMRN): Develops and commercializes biopharmaceuticals for serious diseases and medical conditions. Market cap of $3.56B. Shares shorted have decreased from 10.53M to 9.23M month-over-month, a change representing 1.17% of the company's 111.39M share float. The stock has gained 42.22% over the last year.

4. Cephalon Inc. (CEPH): Engages in the discovery, development, and commercialization of products for central nervous system, inflammatory disease, pain, and oncology therapeutic areas. Market cap of $6.30B. Shares shorted have decreased from 9.92M to 9.18M month-over-month, a change representing 1.05% of the company's 70.71M share float. The stock has gained 28.05% over the last year.

5. BioCryst Pharmaceuticals, Inc. (BCRX): Designs, optimizes, and develops small-molecule pharmaceuticals that block key enzymes involved in infectious diseases, cancer, and inflammatory diseases. Market cap of $126.42M. Shares shorted have decreased from 4.68M to 4.31M month-over-month, a change representing 1.01% of the company's 36.54M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.26). The stock has lost 42.97% over the last year.

*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.

Source: 5 Biotech Stocks Seeing Significant Short Covering