Editor’s Note: I gave up playing golf ten years ago after my wife and I moved inside the beltway of Washington DC. I didn’t have time to drive out to the exurbs to find a decent public course to play, so I took up pickleball instead.

But since we moved to southeastern North Carolina two years ago, I have rediscovered my passion for golf. Good golf courses are cheap and plentiful around here, even on the weekends.

However, I am also relearning a painful lesson in patience as I slowly regain what was once a decent skill level. As in investing, when you make a mistake in golf the best thing you can do is take your medicine and get back in position.

Ace in the Hole

Now that I’m playing more golf, I am also being asked a lot more by the strangers I am paired with for my favorite stock market tip. I try to explain to them that I am not a “hot stock” type of investor, but they insist on cajoling some sort of response out of me.

Further compounding the challenge is that they want to know the name of a stock that might double or triple within a few months. I tell them that if I really knew the answer to that question, I would not be playing golf with them but would instead be enjoying my daily round at Pebble Beach while my butler prepares a post-round drink and cigar for me on the back porch of my mansion overlooking Stillwater Cove.

After getting a chuckle out of that (usually), I relent and explain to them what I consider to be the least random way to identify a stock that might soon explode in value. To be sure, it is highly risky since it involves companies that are widely regarded as being on the verge of bankruptcy. But if they manage to avoid that fate, they can quickly escalate in value.

Short Game

Most individual investors have never shorted a stock. That’s because it entails selling borrowed shares of stock that you do not presently own. Instead, you intend to buy those shares back later when they are considerably cheaper, thus generating a profit. To do that, you need to have a margin account with your broker and a very high tolerance for risk.

The vast majority of short sales are made by professional investors. They scour financial statements searching for failing business. These days, that’s not hard to do. Even individual investors can create a stock screen with their online broker that looks for companies with a lot of debt, not much cash, and few tangible assets.

One such business that meets that description is Alzamend Neuro (NSDQ: ALZN). The company describes itself as “a clinical-stage, biopharmaceutical company” that is “committed to Making Alzheimer’s Just a Memory as well as developing effective treatments for psychiatric disorders which affect over 600 million people globally.”

Out of Bounds

Like a lot of unprofitable biopharma companies, Alzamend Neuro is living on borrowed time (and money). It has two drugs in the pipeline, one of which “is in the midst of clinical development for the treatment of Alzheimer’s, bipolar disorder, major depressive disorder (MDD) and post-traumatic stress disorder (PTSD).”

Needless to say, if this treatment proves to be effective and gains FDA approval then ALZN could be worth a lot more than its current $2 billion market cap. Perhaps ten times that amount, or more. But if that drug never makes it to market, then in all likelihood Alzamend is out of business.

That is why short interest in the stock is at 90 percent. That makes Alzamend by far the most shorted stock on the market. Since briefly peaking above $135 (intraday) eleven months ago when it seemed FDA approval may soon be forthcoming, ALZN is now trading below $3.

Long Shot

Although Alzamend’s fate seems all but certain, the company announced two weeks ago that it managed to raise $5 million via a private placement of convertible stock and warrants. According to that press release, “With $5 million in gross proceeds from this Financing received, Alzamend’s financial position is significantly increased, and Alzamend would receive additional proceeds should the Investor exercise the Warrants.”

To be blunt, this may be the last chance Alzamend has to remain solvent. If its current clinical trials are not successful, bankruptcy is all but assured and its common stock would be worth nothing. But if the trials are successful, then Alzamend should be able to raise more money, and on more favorable terms.

If that happens, Alzamend’s short sellers may panic and start buying back the stock before it goes even higher in value. That is what is known on Wall Street as a “short squeeze,” and it is the best way I know of to make a lot of money in a short amount of time in a stock. I’m not saying it’s likely, but it is possible.

Now leave me alone while I’m lining up this putt!