A short squeeze takes place when short-sellers scramble to cover their bearish positions in a rising stock by buying shares. There are several things that can trigger the short squeeze -- favorable earnings reports, takeover news, or the best thing, a stock market bottom.

Many health care stocks are recession-proof and are a great play on the baby boomer market. Since the short-interest reports have recently come out, Stockpickr has reviewed the health care stocks and extracted the ones with the highest short ratios into the

Top Health-Care Short-Squeeze Stocks

. (A short ratio is the number of days it would take the short-sellers to cover their positions based on the recent average daily volume.)

The stock with the highest short ratio, at 18, is

National Healthcare

(NHC) - Get Report

. This operator of long-term health care, assisted living and independent living centers reported third-quarter results earlier this month that showed a 41% year-over-year increase in earnings per share on a revenue increase of 2.4%. The stock has a price-to-earnings (P/E) ratio of 14.7 and a yield of 1.7%.

National Healthcare appears in

Long-Term Care Stocks

, a Stockpickr portfolio that also includes

Sun Healthcare

( SUNH), with a short ratio of 11.1,

Kindred Healthcare

(KND)

, with a 9.1 short ratio, and

Skilled Healthcare

(SKH)

, with a short ratio of 9.6.

Another high short-ratio stock is

Chattem

( CHTT), a maker and marketer of over-the-counter health-care products that has a short ratio of 13.9. The stock was recently upgraded by Wachovia from market perform to outperform. It has a P/E of 26.8 and a PEG of 1.7.

Chattem is one of the stocks in the portfolio of

Pacific Advisors Small Cap A

(PASMX) fund that has generated an average annual return of 36.7% over the last five years. Other stocks that the fund owns include

Hornbeck Offshore Services

(HOS) - Get Report

, with a 3.1 short ratio,

Terra Industries

( TRA), which has a short ratio of 4, and

Noble International

(NOBL) - Get Report

, with a 9.5 short ratio.

Medicis Pharmaceutical

(MRX)

is another stock with a fairly high short ratio, at 10.4. This specialty pharmaceutical company markets Restylane, the top-selling dermal filler in the U.S. The stock has a P/E of 25.4, a PEG of 0.9 and a yield of 0.5%.

Medicis is a stock owned by

Buffalo Small Cap

(BUFSX), a Morningstar rated fund that invests in both value and growth stocks with market caps of less than $1 billion. Their average annual return is 21.4% for the last five years. Buffalo also holds

WMS Industries

(WMS) - Get Report

, with a 4.3 short ratio,

Corinthian Colleges

(COCO)

, with a short ratio of 11, and

Cabot Microelectronics

(CCMP) - Get Report

, with a short ratio of 14.7.

For more health care stocks with high short ratios, check out the

Top Health-Care 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;

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