2 of the Most Shorted Stocks to Buy Today

Short interest in the Nasdaq rose 1.4% during the first half of April. Fortunately, savvy investors can use short interest data to their advantage by finding quality stocks at high short interest levels and riding them to new gains. While many of the stocks on the latest most-shorted list deserve to be there, a few hidden gems exist among the group. Here's a look at two of the most heavily shorted stocks that are still worth buying today.

Company

Short Interest as a
Percentage of Float

3D Systems (NYSE: DDD  )

33%

Sirius XM Radio (NASDAQ: SIRI  )

12%

Source: Finviz.

Printing money
High short interest can work to a stock's advantage if short-sellers are forced to cover their positions. This can happen because of better-than-expected quarterly results or other unexpected good news from the company. In the case of 3D Systems, bears are concerned about the company's ability to maintain share of an increasingly competitive market. Additionally, analysts' with Morningstar worry that 3D Systems' recent acquisition spree may weaken its margins and cause integration problems down the road. I disagree.

The three-dimensional printing company's diverse range of printers enables 3D Systems to play in a variety of industries. Moreover, the market for additive manufacturing is on track for many more years of growth, and 3D Systems is at the heart of it. Make no mistake: 3D Systems is a long-term bet for investors who can stomach a bit of volatility.

Tuning in to profits
Short-sellers have never been shy about betting against this next stock. Sirius XM Radio comes to the table as the eighth most shorted component on the Nasdaq 100, as measured by DividendChannel.com. However, it looks like the shorts got this one wrong... again. Earlier this week, the stock climbed to a five-year high.

Helped by a recent surge in auto sales, the satellite radio provider continues to add new subscribers. Not to mention, the company recently boosted its free cash flow guidance for the year. All of these indicators bode well for Sirius going forward, especially as it faces competition from music-streaming companies such as Pandora (NYSE: P  ) . While Pandora makes the bulk of its cash from ad dollars, Sirius relies on revenue from monthly subscription fees. Admittedly, I'm a serious subscriber to Sirius XM. One telltale sign that the stock will not succumb to shorts is the fact that Sirius XM continues to get more popular with time, despite so-called disruptors such as Pandora entering the market.

Despite Sirius XM being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in The Motley Fool's premium report. To get started, just click here now.


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  • Report this Comment On May 03, 2013, at 10:26 PM, MountainEdge wrote:

    There is no question that 3D printing will have an enormous impact. Whether 3D Systems will be at the center of it is the real question. The fact that 3D Systems has acquired thirty-three companies in the past three years indicates that there are not a lot of barriers to entry and that other companies may be ahead of them on the technology front. In the past two years revenues are up 121 per cent, but debt and equity are up 322 percent. In the past two years goodwill is up $181M and intangibles (patents, research, customers) are up $90M. They have spent over $330M on acquisitions over the last two years and the first two months of 2013. This does not include the latest acquisition announced this week. I have an investment in 3D Systems, but I do not like the idea that they continue to pay a premium to acquire companies to feed growth.

    I would also say that while 3D Systems and others a grabbing the headlines, the "big boys" like GE and others are underneath the radar. By the way, I also take advantage of the shorts when I believe in a company.

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