Short sellers boost bets against healthcare stocks

Short sellers have been increasing their positions against healthcare stocks over much of this year.

At the end of October, short interest in the healthcare sector reached 4.61%, matching the highest level of bets against the sector since July 2022, according to S&P Global Market Intelligence data.

Short interest in healthcare stocks has risen 61 basis points since the end of 2022 and was 219 basis points higher than overall short interest in the S&P 500 at the end of October. Healthcare is the second-most shorted industry sector, behind only consumer discretionary, which had 5.49% short interest at the end of October, its highest level since mid-June.

Short interest measures the percentage of outstanding shares of a given company or industry held by short sellers, who seek to profit from a stock's decline by borrowing shares to sell at a high price, then repurchasing them after a drop and pocketing the difference.

Biotechnology, a frequent target of short sellers, was the most shorted subsector within the healthcare space. Short interest in biotechnology stocks ticked up to 5.19% at October-end from 5.13% a month earlier.

Pharmaceuticals, with 4.60% short interest, life sciences tools and services, with short interest of 4.39%, and healthcare facilities, at 3.96%, were the next most shorted subsectors at the end of the October.

Cassava Sciences Inc. was the most shorted healthcare stock at 37.96% short interest. Cassava Sciences is a clinical stage biotechnology company that develops drugs for neurodegenerative diseases. The company's stock has fallen from a peak of $135.30 per share on July 28, 2021, to a low of $12.64 per share on Oct. 16, 2023.

Short interest in Cassava Sciences climbed from 33.27% in mid-October to 37.96% at the end of the month, making it the third-most shorted stock.

Beyond Meat Inc. was the most shorted stock at the end of October, at 41.28% of outstanding shares being shorted, followed by Fisker Inc. with 40.84% short interest.