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%. High 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.
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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.