Syntax-Brillian: High Short Interest, Recent Insider Buying

Really, the title says it all. I had heard this before but was reminded of it when someone mentioned that Cramer had suggested that these were the conditions for a short squeeze. As Cramer states, "While shorts are usually smart, they aren’t smarter about the business than the people who actually run it."

I don't usually agree with Cramer but I agree in this instance. Perhaps these two conditions won't always lead to a short squeeze but it still common sense that it is a good sign for a stock. One could add to this all of the other tools for fishing for good values such as the P/E ratio, the PEG ratio, the price relative to intrinsic value, the price relative to the 52 week high and low, the price relative to the daily moving averages and other fundamental and technical indicators.

One stock which has high short interest, recent insider buying and is sitting near its 52 week low, below its moving averages, is Syntax-Brillian (BRLC). When one finds a stock where the company is profitable but is sitting below tangible book value, one has to wonder why. Was the stock shorted because there was reason to believe it would drop or did the stock drop because it was heavily shorted? If the company is profitable, I am guessing it is the latter.

With the federal mandate to convert all television transmissions to digital by 2009, one has to imagine that the TV industry will be quite healthy for the near future. Add to that the "WOW" factor that people get when they visit a friend or relative that has an HD program displayed on their just purchased 1080p LCD TV, and one can easily conclude that insiders are buying for a good reason. 2008 should be a great, if not the best, year for TV makers.

Disclosure: Author has a long position in BRLC