BALTIMORE (TheStreet) -- There are plenty of reasons for stocks to have the attention of short-sellers.
Waning financials, a deteriorating business model and expected upcoming bad news are all par for the course. But what about when a stock's underlying business and fundamentals are good, but the short-sellers are still betting against it? Then it's gearing up to be a potential short-squeeze play.
A short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors. As more and more of the short investors buy shares to cover their positions, share prices skyrocket. Almost anything can trigger a short squeeze, including trumping earnings expectations, winning a lawsuit, unveiling a new product and even announcing a management change.
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.
With this in mind, Stockpickr has created a portfolio of stocks this week with high short interest ratios and the catalysts to trigger a squeeze.
IT communications company
closed another successful quarter last month.
The company impressed investors with solid numbers in an industry that's been forced to pare balance sheets to stay afloat. Nevertheless, a handful of short-sellers are betting against this stock in a big way. The company's short interest ratio currently sits at 10.5, suggesting that it would take nearly 11 days for the shorts to wind out of their positions.
And with triple-digit earnings growth over last year, a diversified customer base and nearly 85% of sales attributable to relatively secure multiyear contracts, the big short interest in the stock could pan out well for those who are long.
One fund that must be hoping for that scenario is the
(JAVTX), which has a three-star rating from Morningstar and $921 million in assets. In addition to a stake in Equinix, the Janus Venture Fund also holds positions in
Diversified mining and oilfield services company
is another stock with a high short ratio.
It's ratio is 23.84, despite delivering a consistently growing bottom line to investors.
Amcol, which is the world's biggest producer of bentonite, has managed to keep its head above water in today's post-credit-crunch market, despite lower demand from customers. That's been thanks largely to price initiatives that the company set about enacting earlier in the year.
And while Amcol does have a number of speed bumps in its path, another quarter of positive results could be just what shareholders need to squeeze out the shorts.
One of Amcol's biggest shareholders is the
(KSCVX), which holds a 5.67% stake in Amcol -- a total of 1.735 million shares -- in addition to stakes in
With improving consumer sentiment, eyes are beginning to turn to retail stocks such as sporting goods chain
The company, which took a hit along with the retail sector last year, has seen increasing sales numbers (nearly 15% growth in the last quarter alone) amid a more spend-happy consumer environment.
Cabela's currently has a short ratio of 20.53, suggesting that it would take nearly 21 days for short-sellers to close out their positions. That's significant short-squeeze potential as conditions continue to improve for the sector.
For the rest of this week's short-squeeze opportunities, including
( PONE), check out the
And to find short-squeeze plays of your own, be sure to check out the
for insights and investment ideas.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, based out of Baltimore, 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.