Top Oil-, Gas-Drilling Short-Squeeze Plays

Updated from 9:46 a.m. EDT

May 26 marked the 100th anniversary of the oil discovery in the Middle East. In 1908, a British oil company drilled a well in Persia, now known as Iran, and struck oil. Today, many investors think that the price of oil is near its peak and have started shorting oil stocks, which could create a short-squeeze opportunity.

A short squeeze takes place when a stock's price rises on good news and the stock's short-sellers scramble to cover their bearish positions. This short-covering, in turn, drives the price of the stock even higher.

The ratio 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 positions based on the stock's recent trading volume.

Stockpickr has come up with a list of the Top Oil and Gas Drilling Short-Squeeze Plays, a portfolio of heavily shorted stocks in the sector that could rise quickly on any positive catalyst.

One oil driller with a high short ratio is Parker Drilling(PKD Quote). This contract driller, whose short ratio is 8.3, just had its corporate notes ratings increased by Moody's from B2 to B1 due to its solid financial track record. The company also just won a five-year Alaska drilling contract valued at $250 million. The stock has a price-to-earnings ratio (P/E) of 10 and a P/E-to-growth ratio (PEG) of 0.8.

Parker shares are owned by the ING FMR Diversified Mid Cap Fund, which is rated five stars by Morningstar and is managed by Thomas Allen. The fund has had a one-year return of 26%. The fund also owns Juniper Networks(JNPR Quote), which has a short ratio of 3.8; Altera(ALTR Quote), with a short ratio of 1.3; and Thermo Fisher Scientific(TMO Quote), with a ratio of 4.2.