Short sellers are pressing bets in the worst performing sector YTD.

Healthcare short interest has risen steadily through 2025, climbing from 6.4% of float in January to 8.3% by mid-September. That compares with an average of 7.4% YTD and leaves the sector pressing toward the upper end of its recent range, making healthcare the most heavily shorted sector other than Financials and signaling persistent skepticism across the healthcare complex.

Notional short interest in US healthcare now stands at $156 billion, up from $128 billion in January and averaging ~$145 billion YTD. The sector has touched a high of $158 billion this year, reinforcing healthcare’s position as one of the largest short sector exposures by dollar terms.

Bearish positioning has grown despite broad market strength, highlighting persistent skepticism across insurers, pharma, and biotech. Healthcare (XLV) is essentially flat YTD (-0.1%), the only Select Sector SPDR ETF in negative territory.

Battleground stocks are amplifying HC sector risk — names like Hims & Hers (+109% YTD), Precigen (+247% YTD), and Sana Biotechnology (+89% YTD) show outsized gains despite heavy shorting, while Recursion (-29% YTD) and Humacyte (-69% YTD) illustrate the downside of bearish-tilted conviction trades.

Squeeze Risk: 27 US healthcare stocks carry an S3 Squeeze Risk score above 80 (out of 100) with at least $50M in notional short interest — the highest count of any sector. If the sector begins to recover, these positions could face elevated covering pressure. Reach out to S3 to see which stocks in your coverage universe are exposed.

Battleground stocks are names where long and short positioning are both elevated, creating a tug-of-war between bulls and bears. These are often volatile names where conviction is high on both sides, and price action can swing sharply as positioning shifts. In healthcare, several small- and mid-cap biotechs have emerged as key battlegrounds in 2025.

Hims & Hers (HIMS) combines scale with momentum, up +109% YTD and still attracting significant short interest, leaving it firmly in battleground territory.

Precigen (PGEN) shows the strongest long-side tilt with a 1.29 Long-to-Short ratio, paired with an eye-catching +247% YTD rally, though it has given back -14% month-to-date.

Prime Medicine (PRME) and Sana Biotechnology (SANA) stand out with strong gains (+65% and +89% YTD) and LTS ratios above 1.1, marking them as battleground winners so far.

On the other side, Recursion (RXRX) and Humacyte (HUMA) screen as bearish-tilted battlegrounds, with LTS ratios below 0.75 and steep YTD declines of -29% and -69%, respectively.

Conclusion: Healthcare has emerged as the market’s most polarized sector in 2025. Short interest has climbed to 8.3% of float and $156B in notional value, making it the second-heaviest short sector after Financials. XLV is the only sector ETF in negative territory year-to-date, highlighting persistent skepticism even as other sectors rally. At the single-name level, healthcare also leads with 27 stocks carrying S3 Squeeze Risk scores above 80 and at least $50M in notional shorts, underscoring how crowding, volatility, and inflection risk are concentrated in the sector. Talk to S3 to see how your coverage universe is exposed.

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The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.