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Updated from 6:30 a.m. EST

A couple of weeks ago, the drop in the stock market was blamed on the weakness in the services sector. This could create an opportunity for investors looking for short-squeeze plays.

A short squeeze takes place when those selling a stock short scramble to cover their bearish positions on any rise in the stock. This short-covering drives the price of the shares up even more sharply.

Short-squeeze potential is measured by the short-squeeze ratio, which is the number of days it would take for short-sellers to cover their positions. Stockpickr has combed through the publicly traded companies in the services sector and compiled a list of 10

potential short-squeeze plays


Clear Channel Outdoor Holdings

(CCO) - Get Free Report

has one of the highest short ratios of the service sector group: 44. This outdoor advertising company was recently upgraded by Bear Stearns from peer perform to outperform. Its earnings release is scheduled for Feb. 14. The stock has a price-to-earnings (P/E) ratio of 41 and a P/E-to-growth (PEG) ratio of 2.

Clear Channel shares are owned by

Enso Capital Management

, a global investment manager that invests in equities around the world. Enso also owns

Brookdale Senior Living

(BKD) - Get Free Report

, which has a short ratio of 12,

Ivanhoe Mines

( IVN), with a 5 short ratio, and

Inverness Medical Innovations

( IMA), with a 9.1 short ratio.

Another stock with a high short ratio is

School Specialty


, with a short ratio of 24. Back in December, this educational products company approved a $50 million share-buyback plan. The company has a P/E of 24 and a PEG of 1.

School Specialty is a stock owned by

Dell Computer

(DELL) - Get Free Report


Michael Dell

through his company MSD Capital. Dell also likes


( IHP), which has a short ratio of 5,

Time Warner Telecom


, with a 12 short ratio, and

Dollar Thrifty Automotive

( DTG), with a 10 short ratio.

Aaron Rents

( RNT) is another company with a high short ratio. This company, which rents and leases electronics and furniture, sports a short ratio of 20.5. In January, the company reported an expected 14% rise in fourth-quarter revenue and a 3.9% revenue increase in same-store sales. The stock has a P/E of 12.5 and a PEG of 1.

Aaron is owned by the

Stratton Small-Cap Value Fund

, a four-star Morningstar-rated fund that specializes in investing in smaller-capitalization companies. It also owns


(CTV) - Get Free Report

, with a 4.6 short ratio,

Anixter International

(AXE) - Get Free Report

, with a 9.3 short ratio, and


(TEX) - Get Free Report

, with a 1.5 ratio.

To see all 10 stocks, check out the

Service Sector Short-Squeeze Stocks


Please note that due to factors including low market capitalization and/or insufficient public float, we consider Dollar Thrifty Automotive to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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


LLC, a wholly owned subsidiary of 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



. 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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