Top Airline Short-Squeeze Plays

Updated from 10:22 a.m. EDT

One way that an investor can make a quick investment gain 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, can drive 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.

Airlines have been one of the hardest-hit industries in the market, especially with the high price of oil. Stockpickr has combed through the heavily shorted airline stocks and come up with the Top Airline Short-Squeeze Plays portfolio.

One of the airline stocks with the highest short interests is Alaska Air Group(ALK Quote), with a short ratio of 10.7. The company just announced that its traffic increased by 2.2% in May. It also said that its on-time performance exceeded 81%. The stock has a P/E of 8.

Alaska Air shows up in the Heartland Value Fund portfolio, a value fund with $1.5 billion under management. The fund has had an average annual return of 15.7% during its 22-year history, and it has returned 21.15% annually over the past five years. The fund also owns InterDigital(IDCC Quote), with a short ratio of 11.1; Swift Energy(SFY Quote), with a 10.6 short ratio; and Federal Signal(FSS Quote), with a 20.4 short ratio.

Another airline with high short interest is SkyWest(SKYW Quote), with a short ratio of 7.5. The company just announced that it decided to drop its bid to acquire ExpressJet Holdings(XJT Quote) and decided instead to enter into a new capacity purchase agreement with ExpressJet and Continental Airlines(CAL Quote). The stock has a P/E of 7 and a PEG of 0.67, and it even pays a yield of 0.7%.