These Homebuilder Stocks Could Soar

One of the most heavily shorted industries is the residential construction industry, thanks to the subprime-mortgage debacle, rising interest rates, overspeculation and a surplus of inventory for sale.

The short-sellers are hoping for a continued drop in the price of homebuilder stocks, but any sudden positive news, such as an interest-rate cut by the Federal Reserve, or even a rumor of one, could send the price of the stocks higher as short-sellers are forced to cover their positions.

For this reason, at Stockpickr we have put together the Short-Squeeze Housing Stocks, a list of heavily shorted names in the sector.

The second most shorted homebuilder is Brookfield Homes(BHS Quote), with a short ratio of 26 and more than 21% of the float sold short. The Virginia-based company specializes in luxury single-family and multifamily construction. The stock has a trailing price-to-earnings ratio of 5, but the company's revenue has dropped by more than 24% year over year.

The stock appears on Barron's Insider Purchases 6-25-07, making this list after CEO Ian Cockwell last month purchased 133,800 shares, or about $4 million worth of stock. This portfolio also lists a couple of other stocks with high short ratios, Ligand Pharmaceuticals(LGND Quote), with a short ratio of 15.8, and Terremark Worldwide(TMRK Quote), with a short ratio of 23.

Brookfield also appears in Insider Purchases and Buybacks X, a recent Stockpickr portfolio that also features Steelcase(SCS Quote), which has a short ratio of 17.

Want more? Check out TheStreet.com TV video. Gregg Greenberg discusses some heavily shorted homebuilder stocks that could be squeezed higher.