Potential Short-Squeeze Plays for the New Year

Many stocks could be ripe for a short-squeeze higher, with year-end tax-related selling and continued shorting of a significant number of stocks.

A short-squeeze takes place when unexpected positive news comes out about a heavily shorted stock, and as a result the stock moves sharply higher due to the short-sellers covering their bearish positions in the stock. A stock's short interest is measured by the short ratio, which is the number of days it would take the short-sellers to cover their positions based on the stock's recent trading volume.

Stockpickr has reviewed the stocks with the highest short ratios that have market caps over $250 million and relatively low price/earnings-to-growth (PEG) ratios (below 2). These stocks are compiled in the Top Year-End Short-Squeeze Stocks.

One of the stocks with the highest short ratios is Healthcare Services Group(HCSG Quote), which provides various maintenance and cleaning services to nursing homes, retirement homes, rehabilitation centers and hospitals. The company carries a short ratio of 25. In October, the company increased its quarterly dividend by 9% to 12 cents a share, giving it a yield of 2.2%. The stock has a price-to-earnings (P/E) ratio of 31 and a PEG of 1.8.

Healthcare Services is part of the portfolio of Alpine Dynamic Dividend Fund, a five-star Morningstar-rated fund that has generated an average annual return of more than 16% over the last three years. Alpine also owns shares of BHP Billiton(BHP Quote), which has a short ratio of 1.5, Macquarie Infrastructure(MIC Quote), with a 4.9 short ratio, and Temple-Inland(TIN Quote), which has a 3 short ratio.