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Top NYSE Short-Squeeze Plays

Stockpickr Staff

Many investors are on the constant lookout for significant upward movement in stocks on a short-term basis. One way that an investor can make a quick gain is through a short-squeeze play.

A short squeeze takes place when a stock's short-sellers cover their positions quickly when good news boosts the price of the stock. This short-covering often drives the stock price even higher. The metric for measuring short-squeeze plays is the short ratio, which represents the number of days it would take a stock's short-sellers to cover their position based on the stock's recent average daily volume.

Stockpickr has come up with a list of the stocks on the New York Stock Exchange with high short interest and compiled them here: NYSE Short-Squeeze Plays for May.

One of the stocks with a high short ratio is Simpson Manufacturing(SSD Quote), a manufacturer of building products, including wood-to-wood, wood-to-concrete and wood-to-masonry connectors, adhesives and mechanical anchors. The stock has a short ratio of 47.9. The company just announced its first-quarter earnings and reported that its net income decreased by 51.7%. The stock has a P/E of 20, a PEG of 1.53 and a yield of 1.7%.

Simpson is owned by Pennsylvania Mutual, which was named one of the seven funds to own in 2007 by Fortune magazine. The fund has had an average return of 17.1% over the last five years. The fund also owns Woodward Governor Company(WGOV Quote), which has a short ratio of 5.1; Lincoln Electric Holdings(LECO Quote), with a short ratio of 4.8; and Oil States International(OIS Quote), with a short ratio of about 8.

Another stock with a high short ratio is NorthStar Realty Finance(NRF Quote), with a short ratio of about 34. This debt-oriented commercial real estate investment trust just reported that first-quarter revenues were up 18% and net income was 35 cents per share vs. 39 cents per share for the first quarter of 2007. The stock has a P/E of 2.8, a PEG of about 1 and a yield of 14%.

NorthStar shows up in the Stockpickr portfolio Barron's "Speaking Of Dividends" for December 29, 2007, which listed extremely high-yielding stocks. Other stocks in the portfolio include Newcastle Investment(NCT Quote), which has a short ratio of 21.1, and GateHouse Media(GHS Quote), with a 24 short ratio.

Tootsie Roll Industries(TR Quote) is another heavily shorted stock, carrying a short ratio of 25.7. This candy stock rose along with several other confectionary stocks last month when Warren Buffett agreed to buy Wrigley(WWY Quote) for $23 billion. The stock has a P/E of 26 and a yield of 1.4%.

Tootsie Roll is owned by the Wells Fargo Advantage Mid Cap Fund, which has a four-star Morningstar rating and is managed by Robert Costomiris. The fund has had an average return of 19.1% over the last five years. It also holds Kroger(KR Quote). which has a short ratio of 2.1, and another candy company, Hershey(HSY Quote), with a 7.3 short ratio.

To see the complete list, check out the NYSE Short-Squeeze Plays for May portfolio at Stockpickr.com.