Updated from 10:52 a.m. EST

Many of the most heavily shorted stocks that trade on the Nasdaq hail from the financial sector; however, other sectors such as health care and manufacturing are also represented.

A heavily shorted stock can move sharply upward on any positive catalyst as short-sellers are forced to scramble to cover their bearish positions. A stock's short interest is measured by the short ratio, which represents the number of days it would take those shorting the stock to cover their bearish bets, based on recent trading volume.

Stockpickr has reviewed the stocks that trade on the Nasdaq and compiled a list -- Top Nasdaq Short-Squeeze Stocks for February -- of the stocks that exhibit the highest short ratios and lowest PEG, or price/earnings-to-growth, ratios. Generally, the lower the PEG, the better the value, with a PEG below 2 considered very favorable.

One of the Nasdaq stocks with a high short ratio is Houston Wire & Cable ( HWCC), which carries a short ratio of 21. This manufacturer of various types of electronic cables just a few weeks ago raised its dividend by a penny to 8.5 cents a share. It is slated to report earnings on March 17. The stock has a price-to-earnings (P/E) ratio of 10, a PEG of 0.6 and pays a yield of 2.3%.

Houston Wire showed up in the Stockpickr portfolio called Insider Purchases and Buybacks, a Feb. 26 portfolio that lists stocks with either a large insider purchase or stock buyback. Other stocks in the portfolio include IBM ( IBM), with a short ratio of 1.6, Bally Technologies ( BYI), with a 7.2 short ratio, and Lazard ( LAZ), which also has a 4.1 short ratio.

Middleby ( MIDD) is another high-short-ratio stock with a low PEG ratio. The cooking equipment manufacturer last week posted an 8-cent per-share earnings beat for its fourth quarter. Its short ratio is 9.9. The stock has a P/E of 23 and a PEG of 0.8.

Middleby is part of the portfolio of the Bjurman MicroCap Growth Fund, which invests in smaller cap stocks. It also holds Dynamic Materials ( BOOM), which has a 6.1 short ratio, Andersons ( ANDE), with a 7.7 short ratio, and Air Methods ( AIRM), which has a 12.8 ratio.

Quality Systems ( QSII) is a stock with a short ratio of 15.7 and a PEG ratio of 1. This health-care information systems company beat earnings estimates when it reported fourth-quarter results a couple of weeks ago and issued robust sales growth outlook for 2008. The stock has a P/E of 23 and pays a yield of 3.1%.

Quality shares are owned by the Turner Emerging Growth Fund, a five-star Morningstar-rated fund that also holds Deckers Outdoor ( DECK), with a 3.2 short ratio, and RTI International Metals ( RTI), with a 5.8 short ratio.

For a complete list of the top stocks with the highest short ratios and lowest PEG ratios, check out the Top Short-Squeeze Stocks for February at Stockpickr.com.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Houston Wire & Cable 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 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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