SPDR S&P Homebuilders (ETF) (XHB), Abercrombie & Fitch Co. (ANF), Novartis AG (ADR) (NVS): Shorts Are Piling Into These Stocks. Should You Be Worried?

Instead of focusing on one patient developing PML which may or may not have anything to do with Gilenya, I’d say Novartis investors and short-sellers need to keep their eye on two things. One is whether or not Gilenya gets eaten alive by Biogen Idec Inc. (NASDAQ:BIIB)‘s Tecfidera. The real knock against Gilenya is that its safety profile isn’t as favorable as Biogen’s Tecfidera. While the two MS-relapsing drugs share similar side-effect characteristics, Gilenya was also shown in rare instances to slow a patient’s heart rate which can lead to cardiovascular problems. There’s a decent chance that Tecfidera could run away from its peers in treating relapsing MS.

But, before you pack your bags and hand Novartis over to the short-sellers, keep in mind that Novartis is among the biggest beneficiaries of the FDA’s new breakthrough therapy designation. With a hand in three separate drugs currently with the breakthrough designation — LDK378 and serelaxin which it’s helping develop and Pfizer Inc. (NYSE:PFE)‘s palbociclib which is given with Novartis’ Femara — Novartis could be sitting on another $6 billion-plus in peak sales in its rapidly developing pipeline. There could always be some intermediate weakness with Novartis, but this is not a stock that I feel short-sellers would be wise to bet against over the long run.

Foolish roundup
This week’s theme is all about differentiable factors. For homebuilding and home improvement companies they really don’t have any outlets that would allow them to rise above a higher interest rate scenario. Similarly, with Abercrombie & Fitch Co. (NYSE:ANF) it’s numerous PR gaffes have lost it the value previously perceived by its core customer. Novartis, though, has a deep pipeline in its back pocket which makes betting against this pharmaceutical name probably not the best idea.

The article Shorts Are Piling Into These Stocks. Should You Be Worried? originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends Lumber Liquidators. It also recommends Home Depot.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.