Top Casino Short-Squeeze Plays

Updated from 10:32 a.m. EDT

Many short-sellers have taken a negative interest in casino stocks, creating a potential opportunity for short-squeeze plays in the sector.

A short squeeze takes place when a stock's short-sellers are forced to cover their bearish positions quickly on positive news that drives the stock price higher. This short-covering then works to drive the price of the stock up even more. The main metric for measuring a short-squeeze play 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 trading volume.

Stockpickr has combed through the stocks in the sector and compiled a list of the most heavily shorted names in the Top Casino Short-Squeeze Plays.

One heavily shorted gambling stock is Ameristar Casinos (ASCA), with a short ratio of 15. This Las Vegas-based operator of casinos, with operations in Missouri, Iowa, Mississippi, Colorado, Nevada and Indiana, was upgraded last week by Brean Murray from hold to buy. In March, BMO Capital Markets initiated coverage on the stock with a market perform rating. The stock has a price-to-earnings (P/E) ratio of 15, a P/E-to-growth (PEG) ratio of 1.4 and a yield of 2.3%.

Ameristar shares are owned by Stadia Capital, a New York-based hedge fund managed by Greg Markel. Stadia also owns shares of Deckers Outdoor (DECK), with a 6.1 short ratio, Longs Drug Stores (LDG), with a 7 short ratio, and NII Holdings (NIHD), with a 3 short ratio.