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The following is a list of companies that have been identified as potential takeover candidates by various publications, including Barron's, UBS, Morningstar, Wall Street Journal, Marketwatch, TheStreet.com, and StreetInsider.

To create this list, we started with a universe of about 250 takeover targets. (If you want to access the complete universe of takeover targets, click here.) We then collected data on all of the stocks that have seen a significant decrease in shares shorted between 11/15/2011 - 2/15/2011.

Short sellers seem to think the upside potential outweighs the downside of these names--what do you think? Full details below.

Short trends data sourced from AOL Money.

click for expanded image

The list has been sorted by the change in shares shorted over the last three months.

1. Big Lots Inc. (NYSE:BIG): Discount, Variety Stores Industry. Market cap of $3.12B. Wall Street Journal identified the company as a potential takeover/LBO target. Shorted shares decreased from 8.61M to 3.58M over the last three months (-58.42% change). The stock has had a good month, gaining 29.72%.

2. Terremark Worldwide, Inc. (NASDAQ:TMRK): Telecom Services. Market cap of $1.28B. Barrons identified the company as a potential takeover/LBO target. Shorted shares decreased from 8.52M to 4.07M over the last three months (-52.23% change). The stock has gained 54.95% over the last year.

3. Williams-Sonoma Inc. (NYSE:WSM): Home Furnishing Stores Industry. Market cap of $3.84B. TheStreet identified the company as a potential takeover/LBO target. Shorted shares decreased from 12.86M to 7.39M over the last three months (-42.53% change). The stock has gained 7.13% over the last year.

4. Rackspace Hosting, Inc (NYSE:RAX): Internet Software & Services Industry. Market cap of $4.84B. Barrons identified the company as a potential takeover/LBO target. Shorted shares decreased from 28.68M to 16.73M over the last three months (-41.67% change). The stock is a short squeeze candidate, with a short float at 18.04% (equivalent to 9.96 days of average volume). The stock has had a good month, gaining 10.82%.

5. Whitney Holding Corp. (NASDAQ:WTNY): Regional Bank. Market cap of $1.35B. iStockAnalyst and Dick Bove identified the company as a potential takeover/LBO target. Shorted shares decreased from 8.11M to 5.04M over the last three months (-37.85% change). The stock has gained 43.24% over the last year.

6. ITT Educational Services Inc. (NYSE:ESI): Education & Training Services Industry. Market cap of $2.27B. John Dorfman, chairman of Thunderstorm Capital, identified the company as a potential takeover/LBO target. Shorted shares decreased from 7.94M to 5.23M over the last three months (-34.13% change). Might be undervalued at current levels, with a PEG ratio at 0.61, and P/FCF ratio at 4.31.

7. Leap Wireless International Inc. (LEAP): Wireless Communications Industry. Market cap of $923.04M. Street Insider identified the company as a potential takeover/LBO target. Shorted shares decreased from 8.06M to 5.33M over the last three months (-33.87% change). The stock has performed poorly over the last month, losing 17.38%.

8. American Eagle Outfitters, Inc. (NYSE:AEO): Apparel Stores Industry. Market cap of $3.03B. TheStreet identified the company as a potential takeover/LBO target. Shorted shares decreased from 18.07M to 12.23M over the last three months (-32.32% change). The stock has lost 4.32% over the last year.

9. First Horizon National Corp. (NYSE:FHN): Regional Bank. Market cap of $2.74B. Dick Bove identified the company as a potential takeover/LBO target. Shorted shares decreased from 31.11M to 21.6M over the last three months (-30.57% change). Relatively low correlation to the market (beta = 0.64), which may be appealing to risk averse investors. The stock has gained 16.89% over the last year.

10. InterMune Inc. (NASDAQ:ITMN): Biotechnology Industry. Market cap of $2.25B. Morningstar identified the company as a potential takeover/LBO target. Shorted shares decreased from 5.47M to 3.84M over the last three months (-29.8% change). This is a risky stock that is significantly more volatile than the overall market (beta = 2.26). It's exhibiting strong upside momentum--currently trading 15.4% above its SMA20, 15.4% above its SMA50, and 135.65% above its SMA200.

11. Quicksilver Resources Inc. (NYSE:KWK): Independent Oil & Gas Industry. Market cap of $2.44B. Street Insider identified the company as a potential takeover/LBO target. Shorted shares decreased from 8.95M to 6.57M over the last three months (-26.59% change). It's been a rough couple of days for the stock, losing 7.42% over the last week.

12. RadioShack Corp. (NYSE:RSH): Electronics Stores Industry. Market cap of $1.55B. TheStreet identified the company as a potential takeover/LBO target. Shorted shares decreased from 12.87M to 9.46M over the last three months (-26.5% change). The stock has lost 20.79% over the last year.

13. SAVVIS Inc. (NASDAQ:SVVS): Business Services Industry. Market cap of $1.89B. Barrons identified the company as a potential takeover/LBO target. Shorted shares decreased from 3.97M to 2.94M over the last three months (-25.94% change). This is a risky stock that is significantly more volatile than the overall market (beta = 2.13). The stock has gained 30.43% over the last year.

14. Research In Motion Limited (RIMM): Diversified Communication Services Industry. Market cap of $35.83B. Business Insider identified the company as a potential takeover/LBO target. Shorted shares decreased from 32.7M to 24.38M over the last three months (-25.44% change). The stock has had a good month, gaining 13.33%.

15. Rowan Companies Inc. (NYSE:RDC): Oil & Gas Drilling & Exploration Industry. Market cap of $5.40B. John Dorfman, chairman of Thunderstorm Capital, identified the company as a potential takeover/LBO target. Shorted shares decreased from 7.61M to 5.68M over the last three months (-25.36% change). The stock has had a couple of great days, gaining 7.36% over the last week.

16. Kellogg Company (NYSE:K): Processed & Packaged Goods Industry. Market cap of $19.87B. UBS identified the company as a potential takeover/LBO target. Shorted shares decreased from 9.86M to 7.46M over the last three months (-24.34% change). Relatively low correlation to the market (beta = 0.45), which may be appealing to risk averse investors.

17. Barnes & Noble, Inc. (NYSE:BKS): Specialty Retail Industry. Market cap of $773.96M. Street Insider and TheStreet.com identified the company as a potential takeover/LBO target. Shorted shares decreased from 10.55M to 8.05M over the last three months (-23.7% change). The stock is currently stuck in a downtrend, trading -21.39% below its SMA20, -20.11% below its SMA50, and -16.47% below its SMA200.

18. United States Steel Corp. (NYSE:X): Metal Fabrication Industry. Market cap of $8.16B. Street Insider identified the company as a potential takeover/LBO target. Shorted shares decreased from 29.29M to 22.58M over the last three months (-22.91% change). After a solid performance over the last year, the stock has pulled back during recent sessions. The stock is -4.54% below its SMA20 and -3.12% below its SMA50, but remains 15.45% above its SMA200.

19. NetApp, Inc. (NASDAQ:NTAP): Data Storage Devices Industry. Market cap of $18.96B. Street Insider, UBS, and Marketwatch identified the company as a potential takeover/LBO target. Shorted shares decreased from 22.7M to 17.92M over the last three months (-21.06% change). The stock has gained 0.52% over the last year.

20. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX): Drug Manufacturer. Market cap of $10.21B. Morningstar identified the company as a potential takeover/LBO target. Shorted shares decreased from 14.2M to 11.32M over the last three months (-20.28% change). Exhibiting strong upside momentum--currently trading 20.85% above its SMA20, 27.91% above its SMA50, and 39.15% above its SMA200.

21. Teradyne Inc. (NYSE:TER): Semiconductor Equipment & Materials Industry. Market cap of $3.46B. John Dorfman, chairman of Thunderstorm Capital, identified the company as a potential takeover/LBO target. Shorted shares decreased from 24.79M to 19.8M over the last three months (-20.13% change). Might be undervalued at current levels, with a PEG ratio at 0.72, and P/FCF ratio at 7.05.

22. Onyx Pharmaceuticals Inc. (NASDAQ:ONXX): Biotechnology Industry. Market cap of $2.26B. Street Insider identified the company as a potential takeover/LBO target. Shorted shares decreased from 5.35M to 4.3M over the last three months (-19.63% change). The stock has had a couple of great days, gaining 5.37% over the last week.

23. Veeco Instruments Inc. (NASDAQ:VECO): Semiconductor Equipment & Materials Industry. Market cap of $1.90B. UBS identified the company as a potential takeover/LBO target. Shorted shares decreased from 13.51M to 10.89M over the last three months (-19.39% change). This is a risky stock that is significantly more volatile than the overall market (beta = 2.48). The stock has had a good month, gaining 11.26%.

24. WellCare Health Plans, Inc. (NYSE:WCG): Health Care Plans Industry. Market cap of $1.61B. Street Insider identified the company as a potential takeover/LBO target. Shorted shares decreased from 2.72M to 2.2M over the last three months (-19.12% change).

25. International Bancshares Corp. (NASDAQ:IBOC): Regional Bank. Market cap of $1.28B. Dick Bove identified the company as a potential takeover/LBO target. Shorted shares decreased from 4.96M to 4.02M over the last three months (-18.95% change). The stock has gained 5.51% over the last year.

26. Harley-Davidson, Inc. (NYSE:HOG): Recreational Vehicles Industry. Market cap of $9.51B. Barrons identified the company as a potential takeover/LBO target. Shorted shares decreased from 15.23M to 12.47M over the last three months (-18.12% change). The stock has gained 25.83% over the last year.

27. Energy XXI Limited (NASDAQ:EXXI): Oil & Gas Equipment & Services Industry. Market cap of $2.36B. UBS identified the company as a potential takeover/LBO target. Shorted shares decreased from 5.12M to 4.23M over the last three months (-17.38% change). This is a risky stock that is significantly more volatile than the overall market (beta = 2.29). The stock has had a good month, gaining 18.87%.

28. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN): Biotechnology Industry. Market cap of $2.50B. Morningstar identified the company as a potential takeover/LBO target. Shorted shares decreased from 10.28M to 8.55M over the last three months (-16.83% change). The stock has lost 10.24% over the last year.

29. Shutterfly, Inc. (NASDAQ:SFLY): Consumer Services Industry. Market cap of $1.20B. Business Insider identified the company as a potential takeover/LBO target. Shorted shares decreased from 2.99M to 2.49M over the last three months (-16.72% change). The stock has had a good month, gaining 24.02%.

30. Blue Nile Inc. (NASDAQ:NILE): Catalog & Mail Order Houses Industry. Market cap of $774.18M. Business Insider identified the company as a potential takeover/LBO target. Shorted shares decreased from 5.81M to 4.85M over the last three months (-16.52% change). After a solid performance over the last year, NILE has pulled back during recent sessions. The stock is -3.96% below its SMA20 and -5.69% below its SMA50, but remains 10.02% above its SMA200.

Source: 30 Takeover Targets With Decreasing Short Interest