Top Financial Short-Squeeze Plays

With the financial sector dominating the business news headlines, and financial stocks such as Goldman Sachs (GS Quote) and JPMorgan (JPM Quote) helping to lead some moves higher, now may be the time to look at heavily shorted names in the sector in anticipation of a snapback, when short-sellers scramble to cover their positions.

This is especially true with companies such as Lehman Brothers (LEH Quote) and UBS (UBS Quote), who are fighting the short-sellers by issuing stock to increase their liquidity. The key ratio for analyzing short-squeezes is the short ratio, which represents the number of days it would take for those shorting a stock to cover their bearish positions should the stock start moving higher, based on the stock's recent average daily trading volume.

With this in mind, Stockpickr has compiled a list of the Top Financial Short-Squeeze Plays.

One of the stocks with a high short ratio is Woori Finance Holdings (WF Quote), a South Korean-based financial services and banking company with a short ratio of 45.5. The stock rose 9% April 1, following Lehman Brothers' liquidity news. Woori has a forward price-to-earnings ratio of 6.6 and a P/E-to-growth ratio of 0.6.

Woori appears in a Stockpickr portfolio called South Korean Stocks You Can Invest In From US. Other stocks in the portfolio include Kookmin Bank (KB Quote), which has a 1.4 short ratio, Shinhan Financial Group (SHG Quote), with a 0.9 short ratio, and SK Telecom (SKM Quote), with a short ratio of 2.

Another stock with a high short ratio is Greenhill & Co (GHL Quote), a New York investment banking firm with a short ratio of 34.2. The company recently appointed its managing director Richard Lieb to the chief financial officer position. The stock has a forward P/E ratio of 14.6, a PEG of 1 and a yield of 2.5%.

Greenhill is a stock owned by Al Gore's investment vehicle, Generation Investment Management. Gore also owns shares of Johnson Controls (JCI Quote), with a short ratio of 4, Aflac (AFL Quote), with a 2.1 short ratio, and Becton, Dickinson (BDX Quote), which has a short ratio of 0.9.

Enstar Group (ESGR Quote) is another financial stock with a high short ratio; the manager of insurance companies has a short ratio of 24.1. The company recently closed its acquisition of AMP Limited's Australian-based reinsurance and insurance operations. The stock has a trailing P/E ratio of 22.

Enstar is a favorite of top stock value investor and hedge fund manager Michael Price. He also holds Tyco Electronics (TEL Quote), which has a 1.9 short ratio, CBS (CBS Quote), with a 5.5 short ratio, and Northwestern (NWEC Quote), with an 11.6 short ratio.

For for other heavily shorted stocks in the sector, check out the Top Financial Short-Squeeze Plays at Stockpickr.com.