The following is a list of highly shorted stocks (short float > 15%) that are significantly undervalued when comparing the current price to the fair value price, calculated by the Graham Number equation.

According to Benjamin Graham, The Graham Number was considered to be the maximum price an investor should pay for a stock.

It is calculated as follows:

The Graham Number = Square Root of (22.5) x (Earnings per Share) x (Book Value per Share).

This equation is predicated on Grahamâ€™s belief that the price-to-earnings (P/EPS) ratio should be no more than 15, and the price-to-book value (P/BVPS) ratio should be no more than 1.5. Therefore we only include companies that meet both of these criteria.

From these criteria, the product of the two should not be more than 22.5. In other words, (P/EPS of 15) x (P/BVPS of 1.5) = 22.5.

If you're looking for short squeeze ideas, this list might offer an interesting starting point.* 1. Boise Inc. (NYSE:BZ): *Paper & Paper Products Industry. Market cap of $716.44M. Short float at 30.32%. BVPS at $8.02, diluted EPS at $0.75. Graham number = sqrt(22.5 x $8.02 x $0.75) = $11.63. Given the current price at $8.73, this implies an upside of 33.26%. This is a risky stock that is significantly more volatile than the overall market (beta = 3.49).

*Auto Dealerships Industry. Market cap of $683.10M. Short float at 17.2%. BVPS at $8.8, diluted EPS at $1.49. Graham number = sqrt(22.5 x $8.8 x $1.49) = $17.18. Given the current price at $12.98, this implies an upside of 32.33%. After a solid performance over the last year, SAH has pulled back during recent sessions. The stock is -4.8% below its SMA20 and -7.48% below its SMA50, but remains 11.25% above its SMA200. The stock has gained 3.11% over the last year.*

**2. Sonic Automotive Inc. (NYSE:SAH):***Business Services Industry. Market cap of $949.71M. Short float at 19.63%. BVPS at $17.68, diluted EPS at $2.19. Graham number = sqrt(22.5 x $17.68 x $2.19) = $29.52. Given the current price at $23.41, this implies an upside of 26.08%. The stock has gained 6.62% over the last year.*

**3. American Greetings Corp. (NYSE:AM-OLD):***Toys & Games Industry. Market cap of $500.77M. Short float at 15.35%. BVPS at $15.28, diluted EPS at $1.52. Graham number = sqrt(22.5 x $15.28 x $1.52) = $22.86. Given the current price at $18.61, this implies an upside of 22.84%. PEG ratio at 0.81, and P/FCF ratio at 8.96. It's been a rough couple of days for the stock, losing 5.74% over the last week.*

**4. JAKKS Pacific, Inc. (NASDAQ:JAKK):***: Insurance Brokers Industry. Market cap of $663.42M. Short float at 16.01%. BVPS at $9.29, diluted EPS at $1.3. Graham number = sqrt(22.5 x $9.29 x $1.3) = $16.48. Given the current price at $13.51, this implies an upside of 22.02%. The stock has lost 53.02% over the last year.*

5. Cninsure Inc. (NASDAQ:CISG)5. Cninsure Inc. (NASDAQ:CISG)

*Diversified Utilities Industry. Market cap of $2.93B. Short float at 15.77%. BVPS at $21.25, diluted EPS at $1.8. Graham number = sqrt(22.5 x $21.25 x $1.8) = $29.34. Given the current price at $25.79, this implies an upside of 13.75%. Relatively low correlation to the market (beta = 0.64), which may be appealing to risk averse investors. The stock has gained 19.21% over the last year.*

6. Westar Energy, Inc. (NYSE:WR):6. Westar Energy, Inc. (NYSE:WR):

*Diversified Utilities Industry. Market cap of $4.94B. Short float at 28.9%. BVPS at $29.15, diluted EPS at $2.98. Graham number = sqrt(22.5 x $29.15 x $2.98) = $44.21. Given the current price at $39.01, this implies an upside of 13.33%. The stock has gained 4.43% over the last year.*

**7. SCANA Corp. (NYSE:SCG):***Industrial Metals & Minerals Industry. Market cap of $769.17M. Short float at 17.6%. BVPS at $17.05, diluted EPS at $1.52. Graham number = sqrt(22.5 x $17.05 x $1.52) = $24.15. Given the current price at $22.35, this implies an upside of 8.04%. PEG ratio at 0.79, and P/FCF ratio at 10.44. It's been a rough couple of days for the stock, losing 8.41% over the last week.*

**8. James River Coal Co. (JRCC):***Graham input data sourced from Yahoo! Finance, all other data sourced from Finviz.

**Disclosure:**I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.