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.

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 . 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.

The article 2 of the Most Shorted Stocks to Buy Today originally appeared on Fool.com.

Fool contributor Tamara Rutter has no position in any stocks mentioned. The Motley Fool recommends 3D Systems. The Motley Fool owns shares of 3D Systems and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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