Traders betting against healthcare firms made $294 million in a single day after the Amazon-JPMorgan-Berkshire Hathaway mega-announcement

  • Trader betting on declines in a managed healthcare ETF made $US294 million on Tuesday as Amazon, JPMorgan, and Berkshire Hathaway’s announced collaboration led to broad selling across the industry.
  • Financial analytics firm S3 Partners notes that short interest in the ETF didn’t increase much amid the weakness.

The selloff in managed healthcare firms after Amazon, JPMorgan, and Berkshire Hathaway said they would form a competing company wasn’t bad news for everyone in the market.

Short sellers – or traders positioned to profit from stock losses – laughed all the way to the bank, notching a single-day gain of $US294 million, according to data compiled by financial analytics firm S3 Partners.

S3 arrives at that figure by calculating the single-day profit short speculators made on each of the 12 companies that make up the iShares Dow Jones Healthcare Provider ETF (IHF), which dropped 2.3% as a whole. As you can see in the table, the fund includes firms ranging from UnitedHealth to Aetna.

1 31 18 healthcare shorts COTDS3 Partners

S3 notes, however, that while short sellers made a killing, they didn’t add much to positions. This suggests to them that it was investors holding the stock long that drove the majority of the selling on Tuesday.

“While the announcement is a harbinger of market disruption in the managed healthcare sector, the immediate pessimistic move in stock prices may be a bit premature,” Ihor Dusaniwsky, managing director of predictive analytics at S3, wrote in a client note. “While the collective intellectual, economic and technical assets of this newly formed alliance is formidable, it may be years until any viable solutions come to fruition.”

As such, S3 says that long shareholders might view the weakness as a buying opportunity. The firm thinks it might even inspire some short sellers to take profits on their positions, which would aid a stock rebound. And sure enough, IHF rallied as much as 2% on Wednesday.

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