Top NYSE Short-Squeeze Plays

Updated from 9:45 a.m. EDT

One potential way to make a swift gain on a stock is through a short-squeeze play. 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 combed through the heavily shorted stocks on the New York Stock Exchange and compiled the Top NYSE Short Squeeze Plays portfolio.

One of the stocks with a high short ratio is Marine Products(MPX), the recreational fiberglass powerboats manufacturer, which has a short ratio of 53.2. The company just announced that its first-quarter earnings increased by 5% primarily due to a lower tax rate. The stock has a P/E of 17, a PEG of 2.39 and a yield of 3.3%.

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Back in February, the company increased its dividend from 6 cents per share to 6.5 cents per share, resulting in the stock appearing in the Stockpickr portfolio called Top Dividend Increasers for the Week Ending 01-26-08. This portfolio also includes Polaris Industries(PII), with a short ratio of 27.6; Donaldson Company (DCI), with an 11.7 short ratio; and Canadian National Railway(CNI), with a 3.0 ratio.

Another stock with a high short ratio is Sealy(ZZ), the mattress and bedding products manufacturer. The stock has a short ratio of 33.8. Sealy reported better-than-expected earnings in April. Coverage was just initiated on the company by Longbow. The stock has a P/E of 8 and a PEG of 1.08.