In his newest book,

Mad Money: Watch TV, Get Rich

, Jim Cramer suggests it's often profitable to target the short-sellers.

Short selling, or selling short, is a technique used by investors who try to profit from the falling price of a stock. If the stock starts to move against them, the only way short-sellers can stem their losses is by buying back the shares they sold short.

A buying frenzy, or a short squeeze condition, is created if too many short-sellers try to buy back shares when no one is selling. Stocks can go up in a parabolic fashion if that happens.

At Stockpickr, we update our portfolio of the

top 10 potential short squeezes

every few weeks. We look not only for stocks with high short ratios (the number of shares sold short divided by average daily volume) but also for insider buying, suggesting that management is putting its own money to work against the short-sellers. Last month, this list had enormous success with

PW Eagle


-- it announced it was being acquired.

Let's examine a name that's on the list currently.

Waste Services

( WSII), at first glance, looks ugly. The company has $1.7 million in cash and $316 million in debt. Its operating margin is a slim 5.19%. So it's no wonder that there are 1.39 million shares short and that the company's stock price has floundered over the past year.

But the story doesn't end there.

With 1.39 million shares short, it would take short-sellers 25 days to cover all of their short positions. That's a long time if the stock starts to really move. And value-oriented hedge fund

Prides Capital

has steadily been accumulating shares of Waste Services. Last month, Prides Capital bought $16 million worth of shares at $9.50 per share. And another fund, Westbury (Bermuda), bought $50 million worth of shares.

Additionally, Waste Services CEO David Sutherland bought $15,856 worth of shares at $9.91 per share. The two funds bought shares directly from the company, and the proceeds were used to pay down some debt and also buy a new facility in Florida. The company is returning to profitability this year, and analysts expect 13% revenue growth over the next year.

Waste Services (WSII)

Although the debt load at Waste Services is large, so are the cash flows. With $67 million in EBITDA (earnings before interest, taxes, depreciation and amortization), the company trades at just 10 times cash flows. I wouldn't be surprised to see Prides or Westbury attempt a leveraged buyout over the next year, something that would crush the short-sellers.

Prides even states on its Web site: "We look for companies of high quality which we can purchase below their intrinsic values, and with which we can create an active partnership with management to add and create value."

Another name on the top 10 potential short squeezes list is


(GBX) - Get Report

, which makes and sells railroad freight car equipment. At the moment, it would take short-sellers 13 days to cover their shares at the current volume. The problem is that on Jan. 9 Greenbrier announced that its fiscal first-quarter earnings fell sharply, due mainly to production difficulties and unexpected income delays. The company also lowered its earnings guidance for the year.

Shares fell from their high of $46.63 and are now at $26. However, over the past month, 10% owner Jeffrey Gendell bought $2 million worth of stock, and several directors also accumulated shares, suggesting that whatever production difficulties the company had should be behind them.

Additionally, energy investment guru

T. Boone Pickens

owns shares of Greenbrier. The company has also appeared on our list of the

most-oversold Russell 3000 stocks

. This list is made up of stocks trading at the largest discounts to their moving average. This suggests a possible mean reversion snapback.

Here's the

full list of top 10 potential squeezes.

Stockpickr tip of the day

: Each day we update several important lists and present them in the Stockpickr format:

  • Analyst Downgrades and Analyst Upgrades. These are usually updated between 9:30 a.m. and 10 a.m. EST, when all of the analyst reports are basically in for the day.
  • The Biggest % Winners and Losers. These lists are updated at 4:15 p.m. each day.
  • Cramer's Lightning Round picks. This list is updated around 8 p.m. each day.

Each Day we update several portfolios in our

Today's Lists


These lists are published on many sites around the Internet, but it's only on Stockpickr that you can see all of the other funds that are in each position at a glance. For instance, last Friday, Cramer recommended

Rite Aid

(RAD) - Get Report

in his Lightning Round. Looking at the Lightning Round portfolio on Stockpickr, I saw that hedge fund Hayground Cove owns shares in Right Aid.

Clicking on Hayground Cove

, I see it is run by former Bear Stearns analyst Jason Ader, who is also very bullish on


(DENN) - Get Report

-- another Cramer pick from "Mad Money." By looking at other Hayground Cove picks, including one he recently became active in, I can attempt to anticipate future "Mad Money" picks.

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of

Trade Like a Hedge Fund


Trade Like Warren Buffett

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

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to send him an email.

Interested in more writings from James Altucher? Check out his newsletter, Internet Review. For more information,

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