Short squeezes take place when the short-sellers of a stock scramble to cover their bearish positions by buying shares of the stock as it moves up in price. Short-squeeze potential is measured by the short ratio, which is the number of days it would take the short-sellers to buy in their shares based on the stock's recent trading volume.
The Nasdaq has plenty of stocks with high short ratios to choose from, but the key is finding the ones with good financials, such as price-to-earnings (P/E) ratios less than 25, P/E-to-growth (PEG) ratios less than 2 and market caps greater than $350 million. Fortunately, Stockpickr has done the work for you and compiled a list of the Top 10 Nasdaq Short-Squeeze Stocks. A Nasdaq stock with a very high short ratio is National Western Life Insurance ( NWLIA), an annuity and life insurance company with a short ratio of 79.6. Last month, the company reported third-quarter earnings of $15.6 million, or $4.28 a share, down from $16.1 million, or $4.40 a share the year before. On a non-GAAP basis, however, it generated earnings from operations of $16.6 million, or $4.55 a share, up from $15.9 million, or $4.37 a share in the previous year. The stocks has a P/E of 9.2. National Western shows up in Deep Value Picks, a Stockpickr portfolio that contains stocks that trade below book value. Other stocks in the portfolio include Capstead Mortgage ( CMO), which has a short ratio of 2, Platinum Underwriters Holdings ( PTP), with a short ratio of 6, and Stone Energy ( SGY), with a short ratio of 4.6. Another stock with a high short ratio is Enstar Group ( ESGR), which acquires and manages insurance companies as well as underwrites insurance risks. It has a short ratio of 39.3. In November, the Bermuda-based company reported third-quarter net earnings of $2.6 million, or 21 cents a share, down sharply from the $11 million, or $1.10 a share, it posted a year ago. The stock has a P/E of 2.2.
Enstar is a stock held by Michael Price, the very successful money manager who was a protégé of Max Heine. Price, who currently has about $1.6 billion under management, also likes American International Group ( AIG), with a short ratio of 1.4, Hudson City Bancorp ( HCBK), with a 4.5 short ratio, and American Greetings ( AM), with a short ratio of 11.8. S&T Bancorp ( STBA), a Pennsylvania bank holding company with a short ratio of 39, is another stock with a high short ratio. The stock has a P/E of 14.4 and a PEG of 1.56. S&T is also listed in the Stockpickr portfolio called High Short Ratios, Low PEGs. Other stocks in the portfolio include Thomson ( TOC), with a very high short ratio of 104, and Kingsway Financial Services ( KFS) at a 13.9 short ratio. For the entire list of 10 stocks, check out the Top Nasdaq Short-Squeeze Stocks at Stockpickr.com.