5 Stocks Under Attack

Everyone loves a winner. It's reasonable to assume, then, that everyone hates a loser. Yet that's not always the case with investing.

Contrarian investors love to pick through stocks that others have cast away. These value investors are the garbage-divers of the marketplace. Conversely, when stocks have a big run-up, some investors like to bet against them. These folks are called short sellers, and they bet that a stock is primed for a fall.

What goes up must come down
Here's a list of stocks on the New York Stock Exchange that reported some of the largest short interest positions in August. We'll turn to the collective intelligence of the Motley Fool CAPS community to learn which of these stocks -- if any -- Foolish investors think have the power to make short work of short sellers.

Of course, this isn't a list of stocks to buy -- or short! Maybe these stocks have some serious problems that warrant the high short interest. Maybe not. What do you think? Will they be squeezed?

Tapping the CAPS advantage
Over on CAPS, more than 65,000 investors are poring over these same stocks, and voting their opinion on each. Sometimes, though, CAPS players like stocks that short sellers don't.

While not every stock is new to the list -- each of these stocks has been here at some time in the past -- it's certainly easy to see why some members are included. The mortgage crisis has been unrelenting, and Countrywide, as the largest mortgage company, makes a natural target. Even though it's cutting back jobs and reducing its footprint, it's also had a lifeline thrown to it by Bank of America (NYSE:BAC). Coupled with the large rate cut by the Fed, that may have caught the shorts short themselves.

Then again, investors don't seem to like any of these companies, since all sport one- or two-star ratings. Does that mean the shorts have it right?

Opportunities big enough to drive through
More than 3,000 professional and novice investors have weighed in on Ford. Admittedly, just less than half of them see the company underperforming the market, but more than 60% of the top-performing All-Stars among them give Ford the thumbs-down. The shorts are smiling, no doubt.

However, with Ford and the United Auto Workers union reaching an agreement on health-care funds -- creating a trust fund like the one Goodyear (NYSE:GT) fashioned with its unions -- I'm hopeful that the automaker now has a chance to pull back from the brink.

One of the CAPS All-Stars who thinks Ford can turn it around, SH2F088, offers a few compelling reasons why:

I believe the contract negotiations will put F in a position to regain profitability and [the] new CEO will help them find a sustainable niche.

A P/E of 7 is typical for F's peak earnings. 7 x the avg earings for 04-05 gives a price of $10.3 while the S&P target price is $9 (based on P/S of .12).

That's a position backed up by another All-Star, who also liked Ford's financial results last quarter. CAPS player optionwinners, sporting a 98.66 player rating, thinks the company can still enjoy significant price appreciation this year:

The last quarter looked wonderful for the turnaround of this company. The stock has been strong through the downturn. I think that your downside risk is limited and the upside has significant potential. I would start to accumulate this stock. The stock should be over 10 by the end of the year and if the turnaround produces a good next quarter we could see much more.

I think these All-Stars have it pegged right.

Take a test drive
Maybe you'll agree with the bulls that Ford's got plenty of drive left in it. Maybe not! Whichever side you choose, tell the CAPS community what you have to say. Only on Motley Fool CAPS does your opinion count just as much as the short sellers'. Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!