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Cash-Generating Short-Squeeze Opportunities

AmeriCredit (ACF) is an auto finance company that buys auto finance contracts from its network of new and used car dealers. As such, the company hasn't been a stranger to bearish sentiment in the last couple of years, but a potential turnaround in the auto finance industry could spur shares on in the next few weeks as earnings time starts to creep up again. ACF's current short interest ratio sits at 11.6, which means that it would take short-sellers more than two weeks to cover their positions under current volume levels.

AmeriCredit has been repositioning its loan portfolio of late, diverging from the high-margin, high-risk subprime loans it once carried, and instead focusing on customers who present better credit risks to shareholders. That strategy appears to be paying off. ACF swung to profitability in 2009, making its way to double-digit net margins and significant free cash flow numbers in its latest quarter. Shares have already made a 26% jump year-to-date, and the company's 95% institutional ownership is banking on even bigger returns for 2010.

Among those institutional investors is Bruce Berkowitz's Fairholme Fund (FAIRX), a $14.4 billion fund that holds Morningstar's coveted five-star rating. Among Fairholme's other positions are Sears (SHLD) and WellPoint (WLP).

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