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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Crush the S&P With 5 Stocks Everyone Hates

Stocks in this article: AVB GRMN SBAC VMED ADS

Alliance Data Systems

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Alliance Data Systems (ADS) is all about customers - their customers' customers, that is. The firm provides marketing and loyalty services for other companies, handling more than 120 million customer relationships with a specific focus on Canada, where its Air Miles subsidiary operates. From gas stations to airlines to banks, Alliance Data is all about outsourced customer relationships.

That's proven to be a lucrative business for ADS. The firm earns double-digit net margins for its trouble, while at the same time building itself an attractive moat. With clients' customer lists and very long-term contracts as standard, revenues are stickier than they would be if ADS didn't own many of the networks that it administers for firms. ADS has also established itself as a major player in the private-label credit card business, processing transactions on behalf of retailers who don't want the hassle or balance sheet risks of issuing cards themselves (for its part, ADS securitizes its receivables, so little credit risk remains on its balance sheet).

ADS currently sports a short interest ratio of 13.7, which means that it would take short sellers close to three weeks to cover their positions. That puts this $6.7 billion firm directly in line with our market-beating strategy this summer.

To see this week's short squeezes in action, check out the of Large-Cap Short Squeezes portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.

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