5 Stocks Under Attack

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

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

What goes up must come down
While each month we view a list of stocks on the NYSE that report having some of the largest short interest positions each month. That has remained relatively static of late with the same names repeating. It might be more interesting to see the companies that are lower on the list because that tends to be more dynamic. Then, once again, we'll turn to the collective intelligence of the Motley Fool CAPS community to find out which of these stocks -- if any -- Foolish investors think have the power to make short work of short sellers.

Company

Shares
Short:
Sept.

Shares
Short:
Aug.

% Change

Total
Shares
Out

Sept.
% Ttl
Out

CAPS
Rating
(out of 5)

Home Depot (NYSE:HD)

55.6

61.8

(10.03%)

1980.00

2.81%

***

Best Buy (NYSE:BBY)

62.3

68.7

(9.32%)

417.78

14.91%

***

General Electric
(NYSE:GE)

65.9

63.4

3.94%

1025.00

6.43%

**

General Motors
(NYSE:GM)

56.5

52.7

7.21%

565.87

9.98%

****

Altria (NYSE:MO)

51.2

54.9

(6.74%)

2110.00

2.43%

****

Shares short data courtesy of Nasdaq. CAPS Rating courtesy of Motley Fool CAPS. Share counts are in millions.

Of course, this isn't a list of stocks to buy -- or short! Maybe these stocks have 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 70,000 investors are looking over these same stocks. Some they like, some they don't, and they all vote on what they think about them. Sometimes, though, the stocks CAPS players like cross swords with ones short sellers don't like.

Not every stock is new to the list -- Best Buy has been here before -- but it's easy to see why some members are included. Most of these names are seeing decreases in their short positions from month to month, but some are seeing those numbers tick up again. GE, for example, saw its shares short rise by 10% in the last two weeks of the month.

With its much smaller 1% rise during same two-week period, GM's increased short count was more gradual. But it might signify that the shorts are not so impressed by the labor contract the carmaker fashioned with its union. Despite being heralded as historic and unique, the shorts seem to think there are still deep-seated problems under the hood.

Almost 2,000 professional and novice investors have weighed in on the world's biggest carmaker, which strives every month to keep that title and not lose it to Toyota (NYSE: TM  ) . As difficult as that challenge is, GM also faces an uphill battle convincing investors it can win. Fully 63% see it underperforming the market, with more than 70% of CAPS All-Stars agreeing. It's an outlook that hasn't changed all that much, as we can see from its CAPS trend.

There is a lot of negative sentiment around GM. CAPS All-Star 12bagger thinks that even with the new union contract, management still hasn't "gotten it."

GM stock has run up considerably as a result of enthusiasm about its health-care deal with the UAW. But the deal isn't a cure GM's main ailment, a surplus of ineptitude in running its business. More gargantuan Hummers, anyone?

CAPS player crazydineh agrees that GM has been unable to match the design quality of its foreign rivals.

Honda (NYSE: HMC  ) and Toyota still look to be ahead of GM in interior style and fuel efficiency. GM used to be my alternative to Ford when I bought a truck. But now, the Toyota and Nissan trucks are growing up and improving, and they are looking more attractive to me.

Of course, GM will still sell vehicles, but unless they produce more attractive vehicles without increasing the sticker price, I do not see them growing.  

However, for all-out fun and amusement, the modern parable by GM Bull Blu53E is required reading.

Speak up
You've heard from the CAPS All-Stars. Now it's your time for a star turn. Tell the CAPS community what you have to say. On Motley Fool CAPS, your opinion counts just as much as the short sellers'. Tell us what you think: Squeeze 'em till it hurts, or short 'em till the sun don't shine. May the best argument prevail!


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