Shorts lick their wounds in two healthcare stocks

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Short sellers reduced their positions in two healthcare stocks which have shown up positively on INK screens over the past month. On February 22nd, we wrote that shorts had boosted their bets against Khiron Life Sciences (Mostly Sunny; KHRN) right before the stock soared to new all-time highs. According to the latest IIROC short report released March 21st, those bets have fallen dramatically.

Short positions have dropped by almost 1.5 million shares over the past month

Since the February 15th dated IIROC short report, shorts have reduced their position by 1,454,742 shares. In terms of floating shares (available for trading according to Refinitiv estimates), the short position has dropped to 2.38% from 5.03% a month. It would have been a painful ride for unhedged shorts since the mid-February report with the stock up 21% as of March 15th. Going forward, the shorts may find themselves in a better position. Not only is the stock less prone to a short squeeze now, but Khiron has also dropped a notch in our overall rankings from Sunny to Mostly Sunny.

Protech Home Medical (Sunny; PTQ) is the other stock in the sector that has seen a significant drop in short bets. In the IIROC report dated February 28th, the stock had 739,216 shares short, or 1.05%. By mid-month, those bets had been pared back to 285,755 or 0.41% of the float. Since the last IIROC report, shorts have been on the losing end. However, with the stock up a modest 1.1%, the pain was not as strong as felt in Khiron. 

Short positions in Protech Home Medical have dropped by 739,216 in the latest IIROC report

Although the PTQ short position has moderated, the chances of a short squeeze remain. That said, fundamentals and overall investor sentiment will likely be the key drivers going forward. In terms of INK rankings, the stock is in top-tip shape, grabbing the number one spot in our March Top 40 stock report (available to Canadian Insider Club members, find out more) The company reports quarterly results early on April 2nd.

One of the drivers of the short position reductions may well have been the closing bought deal financings. On February 28th, Khiron closed a $28.84 million financing while on March 7th, Protech Home closed a $15 million bought deal.

INK Edge outlook ranking categories (Sunny, Mostly Sunny, Mixed, Cloudy, Rainy) are designed to identify groups of stocks that have the potential to out- or under-perform the market. However, any individual stock could surprise on the up or downside. As such, outlook categories are not meant to be stock-specific recommendations. For background on our INK Edge outlook, please visit our FAQ #5 at INKResearch.com.

This post first appeared on INKResearch.com. Disclosure: I hold Khiron Life Sciences.

 

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