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Here we report 10 stocks boosted by extreme investor optimism. Short sellers have significantly decreased their positions in these stocks month-over-month, and these names have very high earnings growth estimates over the next 5 years.

In addition, these stocks are deeply discounted from their mean analyst target price (used as a proxy for fair value).

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



Do you think these companies will meet these high expectations? Use this list as a starting-off point for your own analysis.

List sorted by decrease in shares shorted as a percent of share float.

1. Allegheny Technologies Inc. (ATI): Market cap at $6.36B. Earnings per share growth estimate for the next 5 years at 31.55%. Current price at $59.75 vs. analyst target price of $78.89, implying a potential upside of 32.03%. Shares shorted have decreased from 11.58M to 10.39M month-over-month, a change representing 1.28% of the company's 92.81M share float.



2. RealD Inc. (RLD): Market cap at $1.31B. Earnings per share growth estimate for the next 5 years at 28.33%. Current price at $25.01 vs. analyst target price of $30.05, implying a potential upside of 20.15%. Shares shorted have decreased from 8.72M to 8.34M month-over-month, a change representing 0.94% of the company's 40.53M share float.



3. TiVo Inc. (TIVO): Market cap at $1.23B. Earnings per share growth estimate for the next 5 years at 40.0%. Current price at $9.94 vs. analyst target price of $13.88, implying a potential upside of 39.64%. Shares shorted have decreased from 19.91M to 18.99M month-over-month, a change representing 0.78% of the company's 117.49M share float.

4. Alcoa, Inc. (AA): Market cap at $16.26B. Earnings per share growth estimate for the next 5 years at 36.4%. Current price at $15.01 vs. analyst target price of $20.10, implying a potential upside of 33.91%. Shares shorted have decreased from 69.27M to 61.56M month-over-month, a change representing 0.73% of the company's 1.06B share float.

5. IMAX Corporation (IMAX): Market cap at $1.92B. Earnings per share growth estimate for the next 5 years at 26.22%. Current price at $29.50 vs. analyst target price of $37.67, implying a potential upside of 27.69%. Shares shorted have decreased from 3.80M to 3.43M month-over-month, a change representing 0.67% of the company's 54.85M share float.

6. Jefferies Group Inc. (JEF): Market cap at $4.15B. Earnings per share growth estimate for the next 5 years at 30.75%. Current price at $20.50 vs. analyst target price of $26.75, implying a potential upside of 30.49%. Shares shorted have decreased from 10.21M to 9.44M month-over-month, a change representing 0.41% of the company's 185.62M share float.

7. Textron Inc. (TXT): Market cap at $6.27B. Earnings per share growth estimate for the next 5 years at 59.88%. Current price at $22.49 vs. analyst target price of $30.21, implying a potential upside of 34.33%. Shares shorted have decreased from 20.96M to 20.30M month-over-month, a change representing 0.24% of the company's 275.66M share float.

8. Goodyear Tire & Rubber Co. (GT): Market cap at $3.78B. Earnings per share growth estimate for the next 5 years at 26.35%. Current price at $15.56 vs. analyst target price of $20.89, implying a potential upside of 34.25%. Shares shorted have decreased from 11.17M to 10.63M month-over-month, a change representing 0.24% of the company's 227.97M share float.

9. Concho Resources, Inc. (CXO): Market cap at $8.98B. Earnings per share growth estimate for the next 5 years at 46.4%. Current price at $85.22 vs. analyst target price of $109.04, implying a potential upside of 27.95%. Shares shorted have decreased from 2.43M to 2.22M month-over-month, a change representing 0.21% of the company's 100.30M share float.

10. New Oriental Education & Technology Group (EDU): Market cap at $3.91B. Earnings per share growth estimate for the next 5 years at 26.5%. Current price at $100.73 vs. analyst target price of $128.44, implying a potential upside of 27.51%. Shares shorted have decreased from 883.68K to 826.52K month-over-month, a change representing 0.2% of the company's 29.06M share float.

*Short data sourced from Yahoo! Finance, 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.

Source: 10 Highly Profitable, Undervalued Stocks With Bullish Short Trends