Do you like to follow smart money buying and selling trends? One group of smart money investors includes short sellers, who take positions that are profitable if a stock price falls.
We ran a screen on the biotech industry to find which stocks investors are selling short. We began by screening the biotech industry for stocks with high growth prospects, with 5-year projected EPS growth above 15%.
We then screened these names for those with bearish sentiment from short sellers, with significant increases in shares shorted month-over-month as a percent of share float. This indicates that short sellers are more bearish on these names than they were a month ago.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
click to enlarge image
Do you think these stocks will underperform like short sellers expect? Use this list as a starting point for your own analysis (list average 1-year return: 91%):
1. VIVUS Inc. (NASDAQ:VVUS): Engages in the development and commercialization of therapeutic products for underserved markets in the United States. Market cap at $1.76B. Next 5-year EPS growth at 51%. Shares shorted have increased from 15.20M to 16.93M over the last month, an increase which represents about 2.08% of the company's float of 83.18M shares. Days to cover ratio at 5.69 days.
2. Idenix Pharmaceuticals Inc. (NASDAQ:IDIX): Engages in the discovery and development of drugs for the treatment of human viral and other infectious diseases in the United States and Europe. Market cap at $489.64M. Next 5-year EPS growth at 29%. Shares shorted have increased from 10.36M to 11.34M over the last month, an increase which represents about 1.29% of the company's float of 76.02M shares. Days to cover ratio at 4.71 days.
3. Sequenom Inc. (NASDAQ: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 $373.5M. Next 5-year EPS growth at 27.5%. Shares shorted have increased from 34.41M to 35.70M over the last month, an increase which represents about 1.3% of the company's float of 99.55M shares. Days to cover ratio at 13.22 days.
4. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA): Focuses on discovering, developing, and commercializing oral drugs in the therapeutic areas of cardiovascular, central nervous system, inflammatory, and metabolic diseases. Market cap at $1.83B. Next 5-year EPS growth at 25%. Shares shorted have increased from 42.37M to 44.60M over the last month, an increase which represents about 1.23% of the company's float of 181.41M shares. Days to cover ratio at 4.54 days.
5. Acorda Therapeutics, Inc. (NASDAQ:ACOR): A commercial stage biopharmaceutical company, involves in the identification, development, and commercialization of therapies for multiple sclerosis (MS), spinal cord injury, and other nervous system disorders. Market cap at $901.22M. Next 5-year EPS growth at 18%. Shares shorted have increased from 2.88M to 3.38M over the last month, an increase which represents about 1.36% of the company's float of 36.77M shares. Days to cover ratio at 6.61 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.
Business relationship disclosure: Kapitall is a team of analysts. This article was written by Rebecca Lipman, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.