One telling indictor of the sentiment surrounding a stock is the number of shares shorted - companies with increasing shares shorted are being viewed more negatively by the market. For a look at stocks exhibiting this, we ran a screen on the biotech industry.
We began by screening the biotech industry for stocks with strong liquidity, with current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover their short-term liabilities.
We then screened for those that still have bearish sentiment from short sellers, with significant increases in shares shorted month-over-month representing at least 2% of share float. This indicates that short sellers are more bearish on these names than they were a month ago.
Do you think these stocks deserve to be highly shorted? Use this list as a starting point for your own analysis.
List sorted by increase in share shorted month-over-month as a percent of share float.
1. Spectrum Pharmaceuticals, Inc. (SPPI): Primarily focuses on oncology and hematology. Market cap at $702.34M, most recent closing price at $11.80. Current ratio at 3.18. Shares shorted have increased from 18.32M to 21.37M over the last month, an increase which represents about 6.49% of the company's float of 46.99M shares. Days to cover ratio at 10.81 days.
2. Threshold Pharmaceuticals Inc. (THLD): Engages in the discovery and development of drugs targeting the microenvironment of solid tumors for patients living with cancer. Market cap at $378.23M, most recent closing price at $6.94. Current ratio at 5.79. Shares shorted have increased from 4.86M to 5.95M over the last month, an increase which represents about 2.68% of the company's float of 40.73M shares. Days to cover ratio at 2.49 days.
3. Optimer Pharmaceuticals, Inc. (OPTR): Focuses on discovering, developing, and commercializing hospital specialty products worldwide. Market cap at $714.69M, most recent closing price at $15.19. Current ratio at 3.87. Shares shorted have increased from 9.88M to 10.86M over the last month, an increase which represents about 2.15% of the company's float of 45.65M shares. Days to cover ratio at 16.68 days.
4. Sequenom Inc. (SQNM): Provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research. Market cap at $479.92M, most recent closing price at $4.19. Current ratio at 5.18. Shares shorted have increased from 23.81M to 25.95M over the last month, an increase which represents about 2.02% of the company's float of 105.98M shares. Days to cover ratio at 7.54 days.
*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.