When Insiders and Short-Sellers Collide

Yesterday I was chatting, as I do most days, with some fellow Real Money contributors about stocks, sports, politics and a wide range of other topics. Yesterday, Bob Lang mentioned a stock he was trading as an earnings play. The stock was a momentum favorite that also had a large short interest. Bob was buying a straddle as earnings approached, and as he said, he didn't care who got crushed, shorts or bulls, as long as someone did.

I will leave it to Bob to reveal the stock, but his statement made my memory pop into action. I used to use a screen of stocks with insider buying and a high short interest to find potential turnarounds that could explode higher on good news. It was very successful and helped find some ideas that had extraordinary three-to-six-month price moves. When I combine this screen with my basic valuation work, it often shines a light on value stocks that are improving their fundamentals and are ready to reverse course and move higher as shorts are forced to cover....576 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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