One of the best times to start looking at potential short-squeeze stocks is after the stock market has taken a big dive, similar to what we have experienced over the last week or so.

A short-squeeze stock is a stock that has been heavily shorted and is purchased with the anticipation of the stock moving up sharply on good news due to the short-sellers covering their positions. The short ratio reflects the number of days it would take the short-sellers to cover their positions, based on the recent average daily volume of the stock.

The American Stock Exchange just announced a 4.2% increase in short interest on stocks traded on this exchange. Stockpickr has gone through the list of the

AMEX stocks with the highest short ratios

. Each of these stocks has favorable price-to-earnings (P/E) ratios and market caps over $500 million.

One of the stocks with the highest short ratios is

National Healthcare

(NHC) - Get Report

, with a ratio of 34. This company, which operates long-term health care, assisted living and independent living centers just completed its merger with National Health Realty. The stock has a P/E of 16 and a yield of 1.7%.

National Healthcare also appears on the

Long-Term Care Stocks

portfolio at Stockpickr. Other long-term health care stocks in the portfolio include

Sun Healthcare Group

( SUNH), with a short ratio of 10,

Kindred Healthcare

(KND)

, which has a short ratio of 16, and

Skilled Healthcare Group

(SKH)

, with an 11 short ratio.

Another Amex stock with a high short ratio is

Franklin Street Properties

(FSP) - Get Report

, with a short ratio of 30. This real estate investment trust just released third-quarter earnings that showed a sharp drop in net earnings per share. The stock has a P/E of 11 and pays a yield of 8%.

Franklin Street shows up in the

Barron's Insider Purchases 8-11-07 portfolio

at Stockpickr, due to the fact that an officer and a director recently purchased $1.5 million worth of the stock. Other stocks in that

Barron's

Insider portfolio include

Energy Transfer Equity

(ETE)

, with a short ratio of 4, and

Thornburg Mortgage

( TMA), at 7.

Bio-Rad Laboratories

(BIO) - Get Report

is another fairly high short-ratio stock on the American Stock Exchange, with a 10 days-to-cover ratio. This producer of specialty chemicals for the biochemical and pharmaceutical industries just announced a solid increase in quarterly sales and net earnings per share. The stock has a P/E of 28 and a P/E-to-growth ratio of 2.

The

University of Chicago Endowment

has Bio-Rad in its portfolio. The $5 billion endowment is the 13th largest in the U.S. The endowment also owns

DeVry

(DV)

, with a short ratio of 8, and

KB Home

(KBH) - Get Report

, at 4.

To see the rest of the top stocks on the American Stock Exchange with the highest short ratios, including two stocks that sell for over $400 apiece, check out the

Top AMEX Short-Squeeze Stocks

at Stockpickr.com

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 president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for

The Financial Times

and the author of

Trade Like a Hedge Fund

,

Trade Like Warren Buffett

and

SuperCa$h

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

click here

to send him an email.

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