Hedge Funds Are Buying These 6 Highly Shorted And Oversold Stocks

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 |  Includes: BWLD, GTATQ, LF, RGR, SWHC, USNA
by: Kapitall

If you are interested in potentially underestimated stocks, here is a list that may give some interesting ideas.

We ran a screen on stocks that are being targeted by short sellers, with short floats above 15%, and that are also technically oversold (with RSI(14) below 40).

Next we 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.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

Do you think hedge funds are calling it right on these names? Use this list as a starting point for your own analysis.

List sorted by RSI(14).

1. USANA Health Sciences Inc. (NYSE:USNA): Develops, manufactures, distributes, and sells nutritional and personal care products worldwide. Float short at 60%, and RSI (14) at 19%. Market cap at $512.12M, most recent closing price at $35.49. Net institutional purchases in the current quarter at 1.4M shares, which represents about 21.94% of the company's float of 6.38M shares. As of September 29th, 2012, the 2 top holders of the stock are FMR, LLC (12%), and LSV Asset Management (3.4%).

2. GT Advanced Technologies Inc. (GTAT): Provides polysilicon production technology and multicrystalline ingot growth systems, and related photovoltaic (PV) manufacturing services for the solar industry worldwide. Float short at 31%, and RSI (14) at 34%. Market cap at $357.03M, most recent closing price at $3.0. Net institutional purchases in the current quarter at 18.1M shares, which represents about 15.36% of the company's float of 117.86M shares. AS of September 30th, 2012, the top 2 holders of the stock are Wellington Management (8%), and UBS AG (7%).

3. Smith & Wesson Holding Corporation (NASDAQ:SWHC): Offers metal processing services and manufactures firearms and handcuffs as well as apparel and sportsmen's articles. Float short at 18%, and RSI (14) at 35%. Market cap at $546.65M, most recent closing price at $8.25. Net institutional purchases in the current quarter at 5.6M shares, which represents about 9.11% of the company's float of 61.48M shares. As of September 29th, 2012, the 2 top holders of the stock are The Vanguard Group (6.3%), and Renaissance Technologies (5%).

4. Sturm, Ruger & Co. Inc. (NYSE:RGR): Engages in the design, manufacture, and sale of firearms in the United States. Float short at 48%, and RSI (14) at 37%. Market cap at $838.82M, most recent closing price at $43.78. Net institutional purchases in the current quarter at 1.7M shares, which represents about 9.18% of the company's float of 18.52M shares. AS of September 29th, 2012, the 2 top holders of the stock are London Company of Virginia (7.2%), and Allianz Asset Management (7%).

5. Buffalo Wild Wings Inc. (NASDAQ:BWLD): Engages in the ownership, operation, and franchise of restaurants in the United States. Float short at 17%, and RSI (14) at 39%. Market cap at $1.39B, most recent closing price at $74.88. Net institutional purchases in the current quarter at 950.3K shares, which represents about 5.18% of the company's float of 18.36M shares. As of September 29th, 2012, the 2 top holders of the stock are FMR, LLC (6.6%), and Wellington Management (6.5%).

6. LeapFrog Enterprises Inc. (NYSE:LF): Provides technology-based learning platforms worldwide. Float short at 18%, and RSI (14) at 39%. Market cap at $535.03M, most recent closing price at $7.91. Net institutional purchases in the current quarter at 6.8M shares, which represents about 12.52% of the company's float of 54.32M shares. As of September 29th, 2012, the 2 top holders of the stock are Wells Fargo (7.65%), and Franklin Resources (6.4%).


* Short data sourced from Yahoo! Finance, institutional data sourced from Fidelity, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.