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Top S&P 500 Short-Squeeze Stocks

James Altucher

A short squeeze takes place when the short-sellers in a stock scramble to cover their bearish positions when that stock moves sharply upward; their buying ends up pushing shares even higher. Short positions of stocks are measured by the short-squeeze ratio, which represents the number of days it would take for the short-sellers to cover their positions based on the recent daily volume of the stock.

Stockpickr recently reviewed the stocks in the S&P 500 index, extracted the stocks that have the highest short ratios as well as price/earnings-to-growth (PEG) ratios below 2 and compiled them in the Top S&P 500 Short-Squeeze Stocks.

One of the stocks on the list is Quest Diagnostics(DGX), with a short ratio of 24. This health care diagnostic-testing company just received clearance from the Food and Drug Administration for two point-of-care tests, a whole blood test and a herpes simplex type-2 virus test. The stock has a P/E ratio of 21.5, a PEG of 1.4 and a yield of 0.7%.

Quest shows up in an interesting Stockpickr portfolio called Bleak Friday's (Oct. 19, 2007) Survivors -- Part I, which includes such stocks as Hansen Medical(HNSN), with a short ratio of 4.6, and IntercontinentalExchange(ICE), with a 2.3 short ratio.

Jones Apparel Group(JNY) is another S&P 500 stock with a high short ratio. It would take 15.7 days for the short-sellers to cover their positions based on recent trading volume. The retailer recently delivered a solid third-quarter earnings beat. The stock has a P/E of 15, a PEG of 1.4 and a yield of 2.7%.

Jones is on the Vogue September '07 Advertisers List, a portfolio on Stockpickr that lists the publicly traded companies that advertise in the high-end fashion magazine. Other Vogue stocks on the list are Luxottica Group(LUX), which has a 2.7 short ratio, Nike(NKE), with a short ratio of 2, and Allergan(AGN), with a 4.2 short ratio.

Then there's International Flavors & Fragrances(IFF), a stock with a 13.1 short ratio. It recently reported third-quarter results that revealed a 13% year-over-year increase in earnings per share (before items) on 8% revenue growth.

IFF is owned by Aston/Optimum Mid Cap I (ABMIX), a fund that's generated a one-year return of 17% plus. Its holdings include Unisys(UIS), with a short ratio of 6.3, and Andrew Corp.(ANDW), with a short ratio of 3.

For more S&P 500 stocks with high short ratios and PEG ratios below 2, check out the Top S&P 500 Short-Squeeze Stocks at Stockpickr.com.