Beating Back the Short Attack

Since everyone loves a winner, it's reasonable to assume that everyone also hates a loser -- everyone but short sellers, at least. These contrarian investors, betting that hot stocks are primed to fall, aim to turn their pessimism into potential profits.

This week, we'll look at companies on the New York Stock Exchange with the largest decrease in shares sold short. Combining that information with the collective intelligence of Motley Fool CAPS, we'll see which of these companies Fools believe have the power to make short work of short-sellers.

Company	Shares Short, Feb. 13	Shares Short, Jan. 30	% Change	%   Float	CAPS Rating (Out of 5)
Banco Santander	14.9	32.7	(54.2%)	NM	***
Aflac (NYSE: AFL  )	9.0	20.7	(56.8%)	2.0%	****
US Bancorp (NYSE: USB  )	53.8	64.1	(16.0%)	3.1%	****
Capital One Financial (NYSE: COF  )	31.9	39.3	(18.7%)	8.3%	*
Ford (NYSE: F  )	267.2	273.3	(2.2%)	13.1%	**
Ambac Financial Group (NYSE: ABK  )	38.5	44.5	(13.3%)	13.5%	*
Boston Scientific	26.4	32.2	(18.2%)	1.8%	***
Schering-Plough	21.9	27.1	(19.1%)	1.4%	****
Coca-Cola (NYSE: KO  )	15.7	20.5	(23.6%)	0.7%	****
CapitalSource (NYSE: CSE  )	23.2	27.9	(16.8%)	9.6%	****

Sources: WSJ.com and Motley Fool CAPS. Share counts in millions. NM=not meaningful.

Of course, this isn't a list of stocks to buy -- or short! These stocks could have serious problems that warranted their short interest, but they might also be stricken by short-term troubles. Only Foolish due diligence will tell you for certain; our 130,000-member-strong CAPS community is a good place to start.

The short list
"The least-troubled American carmaker" doesn't sound like much of an endorsement these days, but CAPS All-Star member JBouchard notes that Ford was prescient enough to start remaking its operations well before its U.S. competitors did, thus placing itself further along the road to recovery:

If any of them survive, it will be Ford. The company started their restructuring before GM and Chrysler, thanks to the "outsider" CEO Alan Mulally. Things will be tough in 2009, and Ford may even have to ask for government help. But this is a bet here in CAPS that the company will survive.

Ford may indeed end up being the last man standing among American car manufacturers. In conjunction with its financing arm, Ford is offering a premium to its bondholders by offering to swap as much $10.4 billion in debt for $2.2 billion in cash (plus some stock). Mulally says the deal is mutually beneficial and actually pays bondholders more than the bonds' market value, while reducing Ford's debt burden. Moreover, the UAW is close to approving a new pact with the carmaker that freezes wages and does away with the job bank, which pays laid-off workers most of their salary. The move ought to clear up some roadblocks to Ford's financial stability.

Yet as much as Ford is shoring up its defenses here at home, it's on the offensive abroad, where it expects to outperform the Chinese market this year. China is one place where the auto industry has not been ravaged, and in January, the nation passed the U.S. in total vehicle sales for the first time ever. Ford, however, says its new Fiesta did better than anticipated in its first two months, and with the Chinese auto market expected to grow by 10% this year, Ford believes that it can perform even better than that.

As a result, CAPS member hendrixcr23 thinks a revamped Ford is a good long-term pick for investors.

[My] only concern is that they [didn't] ask for bailout money when the government was handing it out like candy. I am hoping that Washington will stop with the loans, and if they do it might be too late for Ford. However, they have done a lot of good work with the unions, they have nice looking cars coming out, and are making a legitimate move toward plug-ins and hybrids.

Don't sell yourself short
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Then share your views with the CAPS community: Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!