- The health care sector has become the most heavily shorted in the US equity market, says S&P Global Market Intelligence.
- Among the healthcare cohort, biotech shares made up the bulk of the most-shorted stocks at the end of March.
- The healthcare sector has risen this year but is lagging gains on the S&P 500 index.
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The health care sector has emerged as the most heavily shorted in the US stock market, in part as the industry faces the potential for sharper scrutiny by the Biden administration, according to a report published Tuesday.
Of the 10 most-shorted stocks on all exchanges at the end of March, six were shares of health care companies, said S&P Global Market Intelligence. The sector made up a hefty portion of the 20 most-shorted stocks, as well, with a tally of 12.
Average short interest in healthcare stocks was 5.17%, rising by 31 basis points from mid-March and by 53 basis points from mid-February.
Investors have increasingly shorted healthcare stocks as they considered possible regulatory and other efforts that Biden and the government may pursue, including reforms to lower prices for prescription drugs and addressing pharmacy mergers.
Biotech shares made up nearly all of the most-shorted healthcare stocks in March, with Esperion Therapeutics and Clovis Oncology topping the list. Esperion, which focuses on lipid management, had short interest of about 34% in its stock, and shares of Clovis had short interest of about 31%. Inovio Pharmaceuticals, which works on using synthetic DNA products to treat cancer and infectious diseases, had 26% short interest.
The S&P 500’s health care sector is lagging behind the gains on the broader S&P 500 index so far this year. Other areas of the market are finding more favor than the defensive health care sector as increasing COVID-19 vaccinations and fiscal stimulus boost prospects for reopening businesses across the country. The sector has advanced 7% compared with the S&P 500’s climb of 11%.
The top 10 most-shorted stocks stepped higher by nearly 45% when the year started to early February but have since suffered a decline of roughly 14% on the year, said the S&P report.