Squeeze Ideas: 12 Highly Shorted Stocks With Strong Sources Of Profitability

|
Includes: BRLI, CACI, CAKE, GHL, HITK, JAKK, JOSB, KWK, LTM, OUTR, PEET, PRAA
by: Kapitall

Looking for short squeeze ideas? Short squeezes occur when a stock becomes highly shorted but then sees a rally that triggers many short sellers to close their positions (causing an even greater rally).

If you believe that a highly shorted company should soon turn around and rally, it may see a short squeeze.

For ideas, we ran DuPont analysis on stocks that are being highly shorted, with short floats above 15%. DuPont analyzes the sources of ROE profitability.

ROE can be broken up into three components such that increases in ROE can be attributed to those components.

ROE

= (Net Profit/Equity)

= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)

= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

Analyzing the sources of returns for a company, we can focus on companies with the following characteristics: Increasing ROE along with,

  • Decreasing leverage, i.e. decreasing Asset/Equity ratio
  • Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks will soon turn around? Use this list as a starting-off point for your own analysis.

List sorted by change in ROE.

1. Coinstar Inc. (NASDAQ:CSTR): Provides automated retail solutions primarily in the United States, Canada, Puerto Rico, the United Kingdom, and Ireland. Market cap of $1.55B. Short float at 36.38%. MRQ Net Profit Margin increased to 6.14% from 3.91% year-over-year, Sales/Assets increased to 0.37 from 0.26, while Assets/Equity decreased to 2.58 from 2.73. The stock has had a good month, gaining 11.82%.

2. CACI International Inc. (NYSE:CACI): Provides information technology (IT) and professional services to the U. Market cap of $1.61B. Short float at 15.08%. MRQ Net Profit Margin increased to 4.77% from 3.52% year-over-year, Sales/Assets increased to 0.42 from 0.38, while Assets/Equity decreased to 1.78 from 1.92. Might be undervalued at current levels, with a PEG ratio at 0.85, and P/FCF ratio at 7.59. The stock has gained 16.42% over the last year.

3. JAKKS Pacific, Inc. (NASDAQ:JAKK): Designs, produces, markets, and distributes toys and consumer products worldwide. Market cap of $503.47M. Short float at 16.46%. MRQ Net Profit Margin increased to 3.21% from 2.42% year-over-year, Sales/Assets increased to 0.21 from 0.20, while Assets/Equity decreased to 1.53 from 1.62. The stock has lost 0.48% over the last year.

4. The Cheesecake Factory Incorporated (NASDAQ:CAKE): Operates upscale, casual, and full-service dining restaurants in the United States. Market cap of $1.48B. Short float at 19.59%. MRQ Net Profit Margin increased to 5.75% from 4.59% year-over-year, Sales/Assets increased to 0.43 from 0.41, while Assets/Equity decreased to 1.79 from 1.89. The stock has lost 5.13% over the last year.

5. Peet's Coffee & Tea Inc. (NASDAQ:PEET): Operates as a specialty coffee roaster and marketer of fresh roasted whole bean coffee and tea in the United States. Market cap of $773.70M. Short float at 20.44%. MRQ Net Profit Margin increased to 5.64% from 5.26% year-over-year, Sales/Assets increased to 0.46 from 0.40, while Assets/Equity decreased to 1.20 from 1.21. The stock has had a good month, gaining 12.06%.

6. Greenhill & Co., Inc. (NYSE:GHL): Operates as an independent investment bank. Market cap of $1.01B. Short float at 18.30%. MRQ Net Profit Margin increased to 23.66% from 21.01% year-over-year, Sales/Assets increased to 0.19 from 0.18, while Assets/Equity decreased to 1.30 from 1.32. The stock is a short squeeze candidate, with a short float at 18.3% (equivalent to 7.79 days of average volume). The stock has recently rebounded, and is currently trading 13.03% above its SMA20 and 5.38% above its SMA50. However, the stock still trades 34.87% below its SMA200. The stock has had a good month, gaining 15.97%.

7. Hi Tech Pharmacal Co. Inc. (NASDAQ:HITK): Develops, manufactures, markets, and sells generic, prescription, over-the-counter (OTC), and nutritional products in liquid and semisolid dosage forms in the United States. Market cap of $418.91M. Short float at 15.46%. MRQ Net Profit Margin increased to 24.50% from 22.08% year-over-year, Sales/Assets increased to 0.25 from 0.24, while Assets/Equity decreased to 1.13 from 1.14. The stock is a short squeeze candidate, with a short float at 15.46% (equivalent to 8.11 days of average volume). The stock has gained 47.35% over the last year.

8. Quicksilver Resources Inc. (NYSE:KWK): Engages in the exploration, development, and production of unconventional natural gas onshore in North America. Market cap of $1.40B. Short float at 24.55%. MRQ Net Profit Margin increased to 43.71% from 37.98% year-over-year, Sales/Assets increased to 0.07 from 0.06, while Assets/Equity decreased to 3.32 from 5.0. The stock is a short squeeze candidate, with a short float at 24.55% (equivalent to 7.01 days of average volume). The stock has lost 47.69% over the last year.

9. Portfolio Recovery Associates Inc. (NASDAQ:PRAA): Provides outsourced receivables management and related services in the U. Market cap of $1.09B. Short float at 16.22%. MRQ Net Profit Margin increased to 22.27% from 20.99% year-over-year, Sales/Assets increased to 0.11 from 0.10, while Assets/Equity decreased to 1.88 from 2.04. Might be undervalued at current levels, with a PEG ratio at 0.77, and P/FCF ratio at 7.04. The stock is a short squeeze candidate, with a short float at 16.22% (equivalent to 19.59 days of average volume). The stock has lost 2.66% over the last year.

10. Jos. A Bank Clothiers Inc. (NASDAQ:JOSB): Design, retails, and direct-markets men's tailored and casual clothing and accessories. Market cap of $1.41B. Short float at 16.84%. MRQ Net Profit Margin increased to 8.91% from 8.75% year-over-year, Sales/Assets increased to 0.3240 from 0.3212, while Assets/Equity decreased to 1.36 from 1.38. The stock is a short squeeze candidate, with a short float at 16.84% (equivalent to 12.61 days of average volume). The stock has gained 11.51% over the last year.

11. Bio-Reference Laboratories Inc. (NASDAQ:BRLI): Provides clinical laboratory testing services for the detection, diagnosis, evaluation, monitoring, and treatment of diseases primarily in the greater New York metropolitan area. Market cap of $543.07M. Short float at 24.41%. MRQ Net Profit Margin increased to 6.81% from 6.58% year-over-year, Sales/Assets increased to 0.53 from 0.52, while Assets/Equity decreased to 1.56 from 1.63. The stock has lost 11.32% over the last year.

12. Life Time Fitness Inc. (NYSE:LTM): Designs, builds, and operates sports and athletic, professional fitness, and family recreation and spa centers in the United States. Market cap of $1.71B. Short float at 22.23%. MRQ Net Profit Margin increased to 9.72% from 9.47% year-over-year, Sales/Assets increased to 0.15 from 0.14, while Assets/Equity decreased to 1.96 from 2.13. This is a risky stock that is significantly more volatile than the overall market (beta = 2.19). The stock has gained 0.98% over the last year.

*Accounting data sourced from Google 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.