7 Stocks That Might See a Short Squeeze

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 |  Includes: ALNY, BJRI, CLNE, IRDM, MIFI, NTRI, REXX
by: Rougemont

The stocks listed below are some of the most highly shorted stocks on the NASDAQ Stock Exchange. Shorts make money by selling stock in companies they don't own (they "borrow" shares from their broker), with the hopes that they can buy the shares back for less and return the "borrowed" shares back to the broker and make a profit. One problem for shorts is when too many people short the same stock. When a stock is shorted to the point where it becomes an overcrowded trade, it can spark a short squeeze.

A short squeeze is a great risk for shorts. A small jump in price and/or some good news being released by the company can spark panic buying by shorts who want to cover their shorts and cut potential losses before other shorts. All of the stocks below have very high levels of short interest. These factors could be making these stocks more likely to rise and see a short squeeze. Longs can profit from short squeezes, so sometimes it pays to invest in highly shorted stocks. For shorts it might not make sense to have the risk of staying short when too many other shorts could cause a squeeze. Cephalon (NASDAQ:CEPH) and Sunpower (SPWRA) are also heavily shorted stocks, and both recently received takeover offers which resulted in major losses for many shorts in those names. Here are the companies that could see a short squeeze:

Nutrisystem, Inc. (NASDAQ:NTRI) shares are trading at $14.36. Nutrisystem provides weight loss systems. The 50 day moving average is $14.07 and the 200 day moving average is $18. These shares have traded in a range between $13.05 to $24.90 in the last 52 weeks. Earnings estimates for NTRI are 46 cents per share in 2011 and 95 cents in 2012. The dividend is 70 cents per share per year which is a yield of about 4.9%.

Why Nutrisystem's shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 6.6 million shares short. Based on average volume of just about 320,000 shares traded per day, it would take about 20 days worth of volume to match the number of shares short.

Rex Energy Corporation (NASDAQ:REXX) is trading at $ 11.99. REXX is based in State College, PA and is an independent oil and gas company with projects in several areas including in the Marcellus Shale. Rex Energy operates about 2,134 wells. The 50 day moving average is about $11.64 and the 200 day moving average is about $11.80. This company has seen multiple insiders buying shares in the past month. Here are the details for these transactions.

Why Rex Energy shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 10.2 million shares short. Based on average volume of just about 650,000 shares traded per day, it would take about 16 days worth of volume to match the number of shares short.

Novatel Wireless, Inc., (NVTL) shares are trading at $5.46. Novatel makes mobile communication products, and is based in California. The 50 day moving average is $5.46 and the 200 day moving average is $7.51. Earnings estimates for NVTL are for a loss of 37 cents per share in 2011 and a profit of 29 cents for 2012. The 52 week range is $5 to $11.53. Book value is stated at $5.82. Insiders have been buying stock which you can see here.

Why Novatel shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 5 million shares short. Based on average volume of just about 385,000 shares traded per day, it would take about 13 days worth of volume to match the number of shares short. This company has plenty of cash on the balance sheet (about $77 million) and almost no debt which you can see here.

Clean Energy Fuels Corp., (NASDAQ:CLNE) is trading at $15.39. Clean Energy is based in California, and provides natural gas fuel and services. These shares have a 52 week range of $11.75 and $19.36. The 50 day moving average is $15.21 and the 200 day moving average is $14.58. Estimates for CLNE are for a loss of 15 cents per share in 2011, and a profit of 20 cents for 2012. Book value is stated at $5.94.

Why Clean Energy shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 12.2 million shares short. Based on average volume of just about 2.5 million shares traded per day, it would take about 5 days worth of volume to match the number of shares short.

BJ's Restaurants, Inc. (NASDAQ:BJRI) is trading at $47.61. These shares have risen from a 52 week low of $21.11. The 50 day moving average is $40.07 and the 200 day moving average is $33.98. The earnings estimates for 2011 are about 98 cents per share, and $1.17 for 2012. This puts the P/E ratio at well over 30 which is far too rich in my opinion, so I can understand why these shares are heavily shorted. Insiders appear to be taking advantage of the rich valuations and have been repeatedly selling shares. See insider selling here.

Why BJ's Restaurant shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 4.2 million shares short. Based on average volume of just about 260,000 shares traded per day, it would take about 16 days worth of volume to match the number of shares short.

Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is trading around $9.92. ALNY is a biotechnology company based in Massachusetts. These shares have traded in a range between $8.79 to $17.59 in the last 52 weeks. The 50 day moving average is $9.89 and the 200 day moving average is $11.52. ALNY is estimated to lose about $1.22 per share in 2011 and post a loss of about $1.61 per share for 2012. In the product development pipeline, Alnylam has candidates for Huntington's disease, liver cancer, RSV infections, anemia and more. You can learn more about their pipeline here.

Why Alnylam shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 3.6 million shares short. Based on average volume of just about 182,000 shares traded per day, it would take about 20 days worth of volume to match the number of shares short.

Iridium Communications, Inc., (NASDAQ:IRDM) shares are trading at $8.07. This company provides voice and data communications via satellite and is based in Maryland. The 50 day moving average is about $8.29 and the 200 day moving average is about $8.74. Earnings estimates are about 70 cents for 2011 and 72 cents for 2012. This gives IRDM shares a P/E ratio of only about 11 times earnings.

The book value is $9.33 and the P/E ratio is low.

Why Iridium shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 9.9 million shares short. Based on average volume of just about 616,000 shares traded per day, it would take about 16 days worth of volume to match the number of shares short. A fund manager recently said Iridium is on their list of possible takeover targets, which you can read about here.

The data is sourced from Yahoo Finance, Shortsqueeze.com, and Stockcharts.com.

Disclosure: I am long NTRI. The information and data is believed to be accurate, but no guarantees or representations are made. I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only.