Stocks With Short Interest That Are Rated 'Buy'

Stocks with big short interest are to be avoided. But these three are rated 'buy.'
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BOSTON (TheStreet) -- Stocks with short interest are among the riskiest. Investors, after all, are betting they will decline.

Here are three small-cap stocks with large short interest. What differentiates them is that they're rated "buy" at

TheStreet

. Such shares can be volatile. If positive news causes the stock to gain, a so-called squeeze could result, pushing up prices. Either way, these stocks are at an inflection point. With earnings reports looming, they're about to make big moves.

Ebix

(EBIX) - Get Report

designs electronic-commerce programs for insurance companies. The company is scheduled to report first-quarter results tomorrow. Short interest stands at 36%, representing the proportion of shares outstanding that are currently sold short.

Fourth-quarter earnings per share beat the consensus by 18%. Shares declined 0.2% on the news. Ebix has gained 82% in the past year and 68%, annually, since 2007. It sells for a price-to-projected-earnings ratio of 12, a 49% discount to its peer average.

Just three analysts cover Ebix, with two rating its stock "buy" and one rating it "hold."

Northland Securities

expects it to rise 28% to $21.50 and

Singular Research

predicts that it will hit $21. During the fourth quarter, 10 of the 15 largest shareholders, including

Goldman Sachs

(GS) - Get Report

and

BlackRock

(BLK) - Get Report

, purchased additional shares while four decreased their holdings and one retained the size of its position.

Quality Systems

(QSII)

sells information systems, which automate medical and dental practices. It's scheduled to release fiscal fourth-quarter results May 28. Short interest is clocked at 30%. Fiscal third-quarter EPS narrowly beat analysts' consensus forecast. The shares fell 5.1% on the news. They have risen 24%, annually, since 2007 and sell for a price-to-book ratio of 11, a 115% premium to the industry average.

Of researchers following the stock, seven rate it "buy," 15 rate it "hold" and one ranks it "sell."

Piper Jaffray

(PJC) - Get Report

offers a price target of $80, leaving a potential 22% return.

JPMorgan

(JPM) - Get Report

believes the shares will climb to $74. During the fourth quarter, six of the 15 largest shareholders increased their bets while eight, including

Bank of New York

(BK) - Get Report

and

Fidelity

, decreased their positions. One position was unchanged.

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The Buckle

(BKE) - Get Report

is a retailer of mid- to high-end jeans and accessories. It's scheduled to release fiscal first-quarter numbers May 19. Short interest is at 32%. Fiscal fourth-quarter earnings per share beat the mean forecast by 7.8%, sending the shares up 1.3%. The Buckle has appreciated 15%, annually, since 2007. It trades at a price-to-projected-earnings ratio of 12, a 34% discount to its peer average. It's expensive based on book value and sales.

Of firms rating The Buckle, six, or 40%, advocate purchasing its shares, four recommend holding and five say to sell them.

Sidoti & Co.

offers a price target of $47, leaving a potential 25% return.

Roth Capital

believes the shares will ascend to $43. During the fourth quarter, six of the 15 largest shareholders purchased more stock while eight, including

State Street

(STT) - Get Report

and

Morgan Stanley

(MS) - Get Report

, decreased their holdings. One held steady.

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-- Reported by Jake Lynch in Boston.