Top Warren Buffett Short-Squeeze Plays

These heavily shorted stocks share a very famous long investor and the potential to surge higher.
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If you are looking for a short-term stock play but also want the possibility of turning that trade into a long-term investment, consider searching for stocks that are held by an outstanding professional investor and that also have a high short ratio. Why?

An investment by a proven pro is a good sign that a stock has a strong future and is therefore a prime candidate for a long-term investment. A stock with a high short interest, which represents the number of days it takes to cover a short position based on the average daily trading volume, offers the possibility of a trade off a short-term spike on any good news.

Warren Buffett

is widely considered the greatest investor of all time because of his outstanding track record with

Berkshire Hathaway

(BRKA)

. However, there are 10 stocks that Buffett owns with short ratios of 3 or more. Stockpickr has compiled these stocks in the

Warren Buffett Short Squeeze portfolio

.

The Buffett stock with the greatest short ratio is

USG

(USG)

, a gypsum and building materials manufacturer. Its short ratio is 8.2, which means that it would take more than eight days for the short-sellers to cover their bearish positions based on the number of shares that trade on a daily basis. If the short-sellers want (or need) to cover their positions quickly, the price of the stock can shoot up quickly, especially since 18.2% of the float has been shorted.

USG has a price-to-earnings (P/E) ratio of less than 8. Of course, do your homework. As our own Jim Cramer warned in a Lightning Round earlier this year: "USG is deeply levered to the housing market, and you know I am a bear on housing." For the rest of Cramer's take on Buffett's stocks, including

Wal-Mart

(WMT) - Get Report

,

Coca-Cola

(KO) - Get Report

and

ConocoPhillips

(COP) - Get Report

, check out

this portfolio

.

And finally, there's newspaper stock

Washington Post

(WPO)

. It is one of the highest-priced stocks, trading above $750.

Washington Post is another long-term core holding of Warren Buffett that also happens to have a fairly high short ratio of 6. It has a yield of 1.1% and a P/E of 23. It has a huge brand name going for it, but many shorts point to the declining trend in the newspaper business. It may make for another interesting setup, depending on how you view it.

Again, these could be opportunities if you are looking for short-term plays that have the potential to become longer-term investments, taking comfort in the fact that Buffett and other pros are making bullish bets as well.

For more such picks, check out the

Warren Buffett Short Squeeze portfolio

and for all of the investor's holdings, including

Procter & Gamble

(PG) - Get Report

and

Bank of America

(BAC) - Get Report

, visit the

Warren Buffett portfolio

, both of which can be found at Stockpickr.com.

As originally published, this story contained an error. Please see

Corrections and Clarifications.

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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