But short sellers have been wrong about Garmin's shrinking business to date -- and in fact, the personal GPS market actually grew quickly in the last quarter, much to the chagrin of shorts. At the end of the day, Garmin's big advantage in the personal GPS market is its presence in other niche markets for navigation equipment: Aviation, marine, and outdoors. Because Garmin is the league leader in aviation (where its $30,000-plus G1000 glass cockpit system is standard equipment on most small planes today), the firm is able to fuel R&D spending that trickles down to the simple devices that it sells to consumers.
Garmin has been working on a similar big-screen concept for cars, which would follow the same model as the G1000 -- Garmin makes the system, and manufacturers simply integrate it into their vehicles. That opens the doors to considerable growth opportunities for Garmin that its rivals just don't have. Most rivals also don't have Garmin's combination of a debt-free balance sheet, huge margins and $2.7 billion in cold hard cash. Longer term, this stock looks primed for a short squeeze.
Alliance Data Systems
Companies want to know what you do -- tracking consumers' preferences has become big business for marketers in the last decade. That's helped to fuel a nearly 40% rally this year in Alliance Data Systems (ADS - Get Report). ADS 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.But short sellers aren't buying the rally. ADS currently sports a short interest ratio of 14.6, which means that it would take close to three weeks of buying for shorts to get out of this stock at current volume levels. That makes ADS a solid short squeeze candidate right now. Alliance generates 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. The same is true of the firm's private-label credit card business. By using the same network that manages loyalty programs, ADS has been able to enter a lucrative market with extremely high barriers to entry. Earnings on January 28 could be a big short-squeeze catalyst for this stock.