Top Value Stocks With High Short Ratios

Last week, the latest short interest figures came out, showing the number of shares shorted for stocks. From this information, we can calculate the short ratio, also called the "days to cover" ratio, which is the number of days it would take the short sellers to cover their positions based on the average daily volume of the stock.

Stockpickr has taken the list of stocks with the highest short ratios and extracted the ones with price/earnings-to-growth (PEG) ratios below 2, compiling them in the High Short Ratios/Low PEGs portfolio.

The nice feature about heavily shorted stocks is that they can shoot sharply higher on good news. And generally speaking, the lower the PEG ratio, the more undervalued the stock. All the stocks on the list have market caps greater than $350 million.

At the top of the list is Thomson Corp. ( TOC), with an outrageously high short ratio of 145. This publisher of business and professional books and software just reported a huge earnings jump to $4.61 a share, before adjustments, up from 65 cents a share last year. After adjustments, earnings were 48 cents a share. This was on a revenue growth of 11%. Thomson is in the process of taking over Reuters Group PLC. The stock has a P/E ratio of 20 and a PEG of 1.7.

Thomson also appears in the Stockpickr portfolio called Book Stocks, a listing of the publicly traded companies in the book-publishing business. Other stocks in the portfolio are John Wiley & Sons ( JW.A), publisher of the popular "Dummy" book series, with a short ratio of 4.8; and McGraw Hill ( MHP), which has a short ratio of 1.9.

Another stock with an extremely high short ratio is Mitsui and Co. ( MITSY), at 66 days to cover. The Japanese trading company is set to announce earnings Nov. 2. The stock has a P/E of 13 and a PEG of 1.4.

The Stockpickr portfolio Stocks Over $100, a self-explanatory name, is an interesting list of the high-priced shares. The list also includes Goldman Sachs ( GS), a favorite of Jim Cramer, with a short ratio of 1.

Asta Funding ( ASFI) is another stock with an atmospheric short ratio of 49. It's in the business of purchasing and liquidating performing and non-performing consumer receivables, such as credit card debt and phone company charge-offs. It just went ex-dividend last month, offering a small 0.5% yield. The stock has a P/E of 9.7 and a PEG of 1.2.

Asta is a stock owned by the James Small Cap (JASCX), a Morningstar-rated five-star fund that also owns shares of Quanex ( NX), with a short ratio of 8.8, and Tupperware Brands ( TUP), which has a short ratio of 7.1.

For the rest of the stocks, check out the High Short Ratios/Low PEGs portfolio 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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