Tags: chanos | healthcare | short

Jim Chanos Shorting Healthcare Stocks

Friday, 11 Sep 2009 04:09 PM

By Dan Weil

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Renowned short seller James Chanos has turned his attention to healthcare stocks.

The sector will suffer regardless of what happens to the Democrats’ plans for healthcare reform, he told CNBC.

"Our view on the healthcare sector is that it's facing headwinds whether there's a legislative answer or not," said Chanos, president of Kynikos Associates.

"We think it faces competitive and regulatory problems in terms of profit margins in the industry. This is an industry that has profit margins that are twice, some people think three times that of the S&P 500.”

The healthcare industry has been dubbed, “the welfare dons of corporate America,” Chanos notes.

“They decry government intervention in healthcare, yet the government is a huge part already of the healthcare stream, over half, without a lot of accountability. No matter what happens with the legislative issue going forward, we think that from a regulatory point of view as well as a competitive point of view, profit margins are going down.”

Kynikos has broadened its list of healthcare companies to short, beyond some of the device companies and HMOs it originally identified, Chanos says.

“Now we are in pharma, and we’re in some capital equipment areas.”

Not everyone is bearish on healthcare, as evidenced by the rise of health insurance stocks Thursday.

"We still expect benign, signed reform legislation in 2009 and view such an outcome as good news for healthcare investors," John Sullivan, an analyst at Leerink Swann, wrote in a note to clients.

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