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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.

1. Arena Pharmaceuticals, Inc. (ARNA): Focuses on discovering, developing and commercializing oral drugs in the therapeutic areas of cardiovascular, central nervous system, inflammatory and metabolic diseases. Market cap at $1.92B, most recent closing price at $8.82. Net institutional purchases in the current quarter at 29.5M shares, which represents about 13.65% of the company's float of 216.08M shares. Float short at 24%, and RSI (14) at 39.73. The 2 top holders of the stock are Wellington Management and The Vanguard Group.

2. Columbia Sportswear Company (COLM): Engages in the design, development, sourcing, marketing and distribution of outdoor apparel, footwear, accessories and equipment in the United States, Latin America, the Asia Pacific, Europe, the Middle East, Africa and Canada. Market cap at $1.67B, most recent closing price at $49.30. Net institutional purchases in the current quarter at 1.3M shares, which represents about 10.43% of the company's float of 12.47M shares. Float short at 22.25%, and RSI (14) at 22.83. The 2 top holders of the stock are Royce & Associates and Southernsun Asset Management.

3. Leap Wireless International Inc. (LEAP): Provides digital wireless services under the "Cricket" brand name in the United States. Market cap at $457.49M, most recent closing price at $5.78. Net institutional purchases in the current quarter at 3.7M shares, which represents about 8.79% of the company's float of 42.10M shares. Float short at 26%, and RSI (14) at 38. The 2 top holders of the stock are MHR Fund Management and Capital Research Global Advisors.

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

Source: Hedge Funds Are Buying These 3 Highly Shorted And Oversold Stocks