10 Worst Booming Stocks to Buy According to Short Sellers

4. Krystal Biotech, Inc. (NASDAQ:KRYS)

Year-to-Date Performance as of September 14: 61.3%

Short % of Shares Outstanding as of September 14: 12.9%

Number of Hedge Fund Holders: 27

Krystal Biotech, Inc. (NASDAQ:KRYS) is a biotech company based in Pittsburgh, Pennsylvania. It develops genetic medicines for patients with rare diseases in the US.

The primary reason why investors are following Krystal Biotech, Inc. (NASDAQ:KRYS) is its pipeline. It currently has multiple early-stage clinical trials that are expected to make progress in the near future, including studies testing treatments for cystic fibrosis, solid tumors, and autosomal recessive congenital ichthyosis. However, many are skeptical about Krystal Biotech, Inc. (NASDAQ:KRYS) since these are only trial-stage treatments and thus do not offer solid reasons for why they should invest in the company.

Krystal Biotech, Inc. (NASDAQ:KRYS) has gotten FDA approval for one of its treatments, Vyjuvek, a gene therapy for dystrophic epidermolysis bullosa, which is a rare skin disease. However, this is only one approval, and that is for a small market in the US. Krystal Biotech, Inc. (NASDAQ:KRYS) estimates that only 9,000 people in the world suffer from this disease. Considering this, many short sellers consider this stock to be too risky.

Still, this level of risk is intrinsic for almost every biotech company out there. And Krystal Biotech, Inc. (NASDAQ:KRYS) does have encouraging share price growth to warrant a degree of positive investor attention.

At the end of the second quarter, 27 hedge funds were long Krystal Biotech, Inc. (NASDAQ:KRYS), with a total stake value of $877.2 million.

TimesSquare Capital Management mentioned Krystal Biotech, Inc. (NASDAQ:KRYS) in its first-quarter 2024 investor letter:

Our preferences among Health Care stocks are those companies providing novel therapies for unmet needs that deserve premium pricing, or specialized service providers. Krystal Biotech, Inc. (NASDAQ:KRYS), a gene therapy company, soared 42% and we trimmed the position. Their fourth quarter sales surpassed Street estimates by a wide margin. Of note, there is now a reduced time for getting approval for Vyjuvek to treat eye lesions in patients suffering from dystrophic epidermolysis bullosa (blistering of skin).