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3 Highly Shorted Stocks Under $5 Being Bought By Hedge Funds

Do you like to follow the buying trends of smart money institutional investors? We ran a screen with that idea in mind. [More lists:  3 Stocks Under $5 on Winning Streaks]

We began by screening for stocks trading under $5 a share with bearish sentiment, with float shorts above 10%. H igh float short is a sign of bearish sentiment among short sellers, who benefit when share price falls. 

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We then screened for those with bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform into the future. 

If hedge funds are correct in their optimism, short sellers might be forced to cover their short positions quickly as share prices rise, lending possibility to a short squeeze, which sends price even higher. 

For an interactive version of this chart, click on the image below. Tool provided by  Kapitall . Login to access free research tools, share practice portfolios, and more. 

Screen shot 2013-02-01 at 1.17.16 PM

Short sellers are pessimistic about future stock price while institutional investors are bullish.   Do you think hedge funds are calling it right on these names? Use this list as a starting point for your own analysis.

1. BioDelivery Sciences International, Inc. ( BDSI): Focuses on developing and commercializing products in the areas of pain management and oncology supportive care. Market cap at $163.41M, most recent closing price at $4.36. Net institutional purchases in the current quarter at 1.2M shares, which represents about 5.74% of the company's float of 20.90M shares. Shares shorted have increased from 1.20M to 1.44M over the last month, an increase which represents about 1.15% of the company's float of 20.90M shares. Days to cover ratio at 7.12 days.
 

2. Coldwater Creek Inc. ( CWTR): Operates as a multi-channel specialty retailer of women's apparel, accessories, jewelry, and gift items primarily in the United States. Market cap at $115.67M, most recent closing price at $3.79. Net institutional purchases in the current quarter at 3.9M shares, which represents about 28.74% of the company's float of 13.57M shares. Shares shorted have increased from 2.72M to 3.06M over the last month, an increase which represents about 2.51% of the company's float of 13.57M shares. Days to cover ratio at 12.26 days.
 

3. Nanosphere, Inc. ( NSPH): Develops, manufactures, and markets a molecular diagnostics platform, the Verigene System that enables genomic and protein testing on a single platform. Market cap at $157.61M, most recent closing price at $2.81. Net institutional purchases in the current quarter at 4.0M shares, which represents about 10.07% of the company's float of 39.72M shares. Shares shorted have increased from 1.28M to 2.02M over the last month, an increase which represents about 1.86% of the company's float of 39.72M shares. Days to cover ratio at 5.04 days.
 

 

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