RealMoney Silver - Today's Short Squeeze Plays: NAFC

Today's Short Squeeze Plays: NAFC
By Jason Raznick
RealMoney.com Contributor
12/11/2007 4:56 PM EST

Concerns over the U.S. subprime crisis have weighed on investor sentiment, sending many high-quality stocks down and creating potential short-squeeze trading opportunities. The short interest ratio (or simply the short ratio) is a measure of a stock's short position divided by the average daily volume. In other words, it is a measure of the number of days it would take short sellers to cover their entire positions if the share price begins to appreciate.

A short squeeze takes place when the share price of a shorted stock appreciates, sending short-sellers scrambling to cover their bearish positions. When we're looking for potential short-squeeze plays, we look for companies that have a short ratio above 20, a price-over-earnings-to-growth ration of less than 1.5 and a market cap over $250 million. (You can see the rest of the Top Short-Squeezes on Stockpickr.

Nash-Finch (NAFC) is a highly shorted stock, with a short ratio of 24.4 and 16.6% of the float shorted. Although the company's short ratio is high, some of the short interest in the stock may be investors hedging a potential debt position. The food distribution company swung to a third-quarter profit, with earnings of $15.4 million, or $1.12 a share, as compared to a loss of $4.6 million, or 34 cents a share, a year ago.

Nash-Finch's board has approved a share-buyback program of up to one million shares of common stock through to Jan. 3, 2009. It has a forward P/E ratio of 13.22, a P/E/G ratio of 0.99 and a dividend yield of 1.90%. A recent Business Week article named NAFC as having the lowest P/E/G ratio among the Standard & Poor's 1500 index companies in the sector.

Nash-Finch is owned by Ramius Capital Group, which has about $7.6 billion in assets under management and focuses on stable long-term compounding of capital. The fund also owns Scientific Games (SGMS) , which has a short ratio of 8.2, CPI (CPY) , with a short ratio of 5.2 and Mirant (MIR) , with a 9.9 short ratio.

(You can see the rest of the Top Short-Squeezes on Stockpickr.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider CPI to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

At the time of publication, Raznick had no positions in the stocks mentioned, although positions may change at any time.

Jason Raznick is president of Easy Stock Alerts and has been involved with the capital markets for several years. He has worked for Merrill Lynch, Dynamis and Tricap Holdings, a joint venture with Fortress Investment Group. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Raznick appreciates your feedback; click here to send him an email.

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