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Do you consider yourself a contrarian investor? For ideas on how to start your own contrarian search, we ran a screen.

We began by screening the small-cap sector for stocks with bearish sentiment, with float shorts above 10%.

We then screened these names for those with the confidence of their company insiders, such as members of the board and upper management, with significant net insider purchases over the last six months representing close to 2% of share float or higher. Since most companies only have a handful of company insiders, net insider purchases representing 2% of share float is a big show of confidence in their employer's prospects.

We had 18 names, which we narrowed down farther by looking for significant net institutional buying in the current quarter. It's a sign that "smart money" investors like hedge funds are also optimistic about these names.

We were left with five names, which we list in detail below.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

(click image to enlarge)


Given all of the optimism, do you think these companies deserve to be so highly shorted? Use this list as a starting point for your own analysis. List Average 1-Year Return: 43%

The first three have seen significant increases in shares shorted month-over-month:

1. Endeavour International Corporation (NYSE:END): Engages in the acquisition, exploration, development, and production of crude oil and natural gas in the United States and the United Kingdom. Market cap at $470.66M, most recent closing price at $10.10. Float short: 19.35%. Shares shorted have increased from 7.04M to 7.84M over the last month, an increase that represents about 2.86% of the company's float of 27.97M shares. Net institutional purchases in the current quarter at 11.3M shares, which represents about 40.4% of the company's float of 27.97M shares. Over the last six months, insiders were net buyers of 544,339 shares, which represents about 1.95% of the company's 27.97M share float.

2. KRONOS Worldwide Inc. (NYSE:KRO): Engages in the production and marketing of titanium dioxide pigments in North America and Europe. Market cap at $2.01B, most recent closing price at $17.36. Float short: 30.14%. Shares shorted have increased from 6.05M to 6.32M over the last month, an increase that represents about 1.38% of the company's float of 19.57M shares. Net institutional purchases in the current quarter at 3.1M shares, which represents about 15.84% of the company's float of 19.57M shares. Over the last six months, insiders were net buyers of 1,044,270 shares, which represents about 5.34% of the company's 19.57M share float.

3. Pacira Pharmaceuticals Inc. (NASDAQ:PCRX): Engages in the development, commercialization, and manufacture of pharmaceutical products for hospitals and ambulatory surgery centers. Market cap at $553.41M, most recent closing price at $17.07. Float short: 10.6%. Shares shorted have increased from 2.80M to 3.10M over the last month, an increase that represents about 1.45% of the company's float of 20.71M shares. Net institutional purchases in the current quarter at 7.5M shares, which represents about 36.21% of the company's float of 20.71M shares. Over the last six months, insiders were net buyers of 511,422 shares, which represents about 2.47% of the company's 20.71M share float.

4. Synta Pharmaceuticals Corp. (NASDAQ:SNTA): Focuses on the discovery, development, and commercialization of small molecule drug candidates for treating severe medical conditions, including cancer and chronic inflammatory diseases. Market cap at $496.58M, most recent closing price at $8.03. Float short: 18.39%. Net institutional purchases in the current quarter at 2.3M shares, which represents about 6.99% of the company's float of 32.91M shares. Over the last six months, insiders were net buyers of 1,243,920 shares, which represents about 3.78% of the company's 32.91M share float.

5. Genomic Health Inc. (NASDAQ:GHDX): Focuses on the development and global commercialization of genomic-based clinical laboratory services that analyze the underlying biology of cancer allowing physicians and patients to make individualized treatment decisions. Market cap at $1.B, most recent closing price at $32.96. Float short: 13.13%. Net institutional purchases in the current quarter at 1.1M shares, which represents about 6.48% of the company's float of 16.97M shares. Over the last six months, insiders were net buyers of 2,890,046 shares, which represents about 17.03% of the company's 16.97M share float.

*Insider data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 5 Highly Shorted Small-Caps With Strong Insider And Institutional Buying