Momentum Ideas: 11 Undervalued Rally Stocks Seeing Extreme Short Covering

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 |  Includes: ACAS, ASMIY, BRFS, FDML, IMAX, KSU, MU, OC, QSR, REV, VIV
by: Kapitall

Here we present a group of companies that are rallying above their 20-day, 50-day, and 200-day moving averages. These stocks are also undervalued to earnings growth (PEG<1) and have seen significant drops in short interest month-over-month.

We've also tested the recent performance of an equal weighted index of the stocks mentioned below. As the following chart shows, this list has outperformed the S&P 500 index for most of the month. If you want to access a complete historical analysis of performance, click here.

Clearly the market has turned bullish on these names – what do you think? Use this list as a starting-off point for your own analysis.

List sorted by decrease in shares shorted.

1. Vivo Participacoes S.A. (NYSE:VIV): Wireless Communications Industry. Market cap of $16.66B. PEG at 0.41. The stock is currently 2.30% above its 20-day moving average, 13.88% above its 50-day MA, and 40.61% above its 200-day MA. Shares shorted have decreased 50.82% month-over-month (from 1.50M to 737.63K). The stock has had a good month, gaining 18.64%.

Recent Developments: Telefonica SA announced its subsidiaries Vivo and Telesp will merge, with Vivo being incorporated into Telesp (Mar. 2011).

2. ASM International NV (ASMI): Semiconductor Equipment & Materials Industry. Market cap of $2.23B. PEG at 0.62. The stock is currently 9.06% above its 20-day moving average, 10.08% above its 50-day MA, and 40.31% above its 200-day MA. Shares shorted have decreased 29.93% month-over-month (from 101.67K to 71.24K). This is a risky stock that is significantly more volatile than the overall market (beta = 2.36). The stock has had a couple of great days, gaining 12.11% over the last week.

Recent Developments: Announced that subsidiary ASM Pacific Technology Ltd has completed acquisition of Siemens Electronics Assembly Systems (Jan. 2011).

3. Tim Hortons Inc. (THI): Restaurants Industry. Market cap of $8.13B. PEG at 0.86. The stock is currently 4.39% above its 20-day moving average, 8.09% above its 50-day MA, and 22.96% above its 200-day MA. Shares shorted have decreased 28.42% month-over-month (from 302.33K to 216.40K). THI has a relatively low correlation to the market (beta = 0.76), which may be appealing to risk-averse investors. The stock has gained 47.68% over the last year.

Recent Developments: Reaffirmed FY11 EPS guidance in line with analysts’ estimates (Mar. 2011). Announced share repurchase program for up to $445 M in common shares, not to exceed 10% of share float as defined under Toronto Stock Exchange rules (Feb. 2011).

4. Federal-Mogul Corp. (NASDAQ:FDML): Auto Parts Industry. Market cap of $2.61B. PEG at 0.31. The stock is currently 4.28% above its 20-day moving average, 10.13% above its 50-day MA, and 27.41% above its 200-day MA. Shares shorted have decreased 28.29% month-over-month (from 964.06K to 691.37K). This is a risky stock that is significantly more volatile than the overall market (beta = 2.1). The stock has had a couple of great days, gaining 6.25% over the last week.

5. Brasil Foods S.A. (NYSE:BRFS): Meat Products Industry. Market cap of $17.82B. PEG at 0.94. The stock is currently 1.59% above its 20-day moving average, 7.95% above its 50-day MA, and 25.92% above its 200-day MA. Shares shorted have decreased 20.79% month-over-month (from 3.56M to 2.82M). The stock has had a good month, gaining 10.17%.

6. IMAX Corporation (NYSE:IMAX): Photographic Equipment & Supplies Industry. Market cap of $2.08B. PEG at 0.83. The stock is currently 9.73% above its 20-day moving average, 17.73% above its 50-day MA, and 51.32% above its 200-day MA. Shares shorted have decreased 17.39% month-over-month (from 4.37M to 3.61M). The stock has gained 59.11% over the last year.

7. American Capital, Ltd. (NASDAQ:ACAS): Asset Management Industry. Market cap of $3.66B. PEG at 0.35. The stock is currently 4.98% above its 20-day moving average, 10.21% above its 50-day MA, and 40.75% above its 200-day MA. Shares shorted have decreased 15.47% month-over-month (from 15.13M to 12.79M). This is a risky stock that is significantly more volatile than the overall market (beta = 2.41). The stock has had a couple of great days, gaining 7.77% over the last week.

8. Kansas City Southern (NYSE:KSU): Railroads Industry. Market cap of $5.92B. PEG at 0.97. The stock is currently 8.37% above its 20-day moving average, 8.24% above its 50-day MA, and 26.50% above its 200-day MA. Shares shorted have decreased 15.17% month-over-month (from 2.11M to 1.79M). The stock has had a couple of great days, gaining 7.4% over the last week.

9. Micron Technology Inc. (NASDAQ:MU): Semiconductor Industry. Market cap of $11.81B. PEG at 0.69. The stock is currently 5.01% above its 20-day moving average, 5.89% above its 50-day MA, and 32.42% above its 200-day MA. Shares shorted have decreased 15.05% month-over-month (from 56.94M to 48.37M). The stock has had a couple of great days, gaining 12.12% over the last week.

10. Owens Corning (NYSE:OC): General Building Materials Industry. Market cap of $4.71B. PEG at 0.46. The stock is currently 5.33% above its 20-day moving average, 8.31% above its 50-day MA, and 26.34% above its 200-day MA. Shares shorted have decreased 13.83% month-over-month (from 6.94M to 5.98M). This is a risky stock that is significantly more volatile than the overall market (beta = 2.04). The stock has gained 14.54% over the last year.

11. Revlon, Inc. (NYSE:REV): Personal Products Industry. Market cap of $853.14M. PEG at 0.52. The stock is currently 5.57% above its 20-day moving average, 12.81% above its 50-day MA, and 38.53% above its 200-day MA. Shares shorted have decreased 10.34% month-over-month (from 525.34K to 471.02K). This is a risky stock that is significantly more volatile than the overall market (beta = 2.23). The stock has had a good month, gaining 10.03%.

*Short data sourced from Yahoo! Finance, PEG and 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.