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TheStreet Open House

Automotive Short Squeezes for 2010

Stocks in this article: TSLARUSHAPAG

BALTIMORE ( Stockpickr) -- It's been an inauspicious few years for the auto industry. From bankruptcies at two of Detroit's Big Three automakers and a handful of suppliers to high-profile recalls at Toyota (TM), auto investors have reason to be skeptical about a comeback in cars. But that's exactly why a few car stocks are worth watching right now. With credit starting to trickle to consumers again, scores of automotive stocks stand to benefit in a big way.

That's not all. With heavy shorting in place against some of the car industry's most well-known names, the potential for a short squeeze is palpable.

A short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors, causing short-sellers to cover their positions -- and share price to skyrocket. One of the best indicators of just how high a short-squeezed stock could go is the short interest ratio, which divides shares short by average daily trading volume in order to get a ballpark estimate of the number of days it would take for short-sellers to cover their positions. The higher the short ratio, the higher the potential profits when the shorts get squeezed.

Here's a look at a handful of automotive plays that have the potential to see a short squeeze in the mid-term.

>>>Also see: 5 Credit Card Stocks to Sell

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