MILLBURN, N.J. ( Stockpickr) -- I am always in search of growth stocks. I am also always seeking out stocks that have unique blends of financial metrics that line up to try to help whittle an investment edge -- either on the long or short side.
Recently, I decided to seek out some excellent growth candidates by taking a look at small-cap stocks with market capitalization below $1 billion that were members of the Russell 3000 Index (RUA). To achieve the growth characteristics of my search, I further screened out stocks with price-earnings-to-growth, or PEG, ratios that were less than 1. In other words, these stocks are selling at a discount to their earnings growth. I made sure to eliminate stocks that carried any debt.
I wanted to be contrarian and culled out stocks with high short interest ratios. In other words, I sought out small-cap growth stocks that many people were betting would fail.Then I performed a fundamental review of these stocks to select those with business models that I felt were consistent with my economic outlook. What I arrived at was a portfolio of five small-cap growth stocks with high short interest. Let's take a closer look.