Do the Shorts Know Something You Don't?

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

These top companies on the New York Stock Exchange had some of the largest percentage increase in shares sold short. Combining that 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 Jan. 31	Shares Short Jan. 14	% Change	%   Float	CAPS Rating (out of 5)
Telefonica (NYSE: TEF  )	2.3	1.1	109.7%	0.1%	*****
Blackstone Group (NYSE: BX  )	6.8	3.7	83.4%	2.7%	***
Noble (NYSE: NE  )	15.6	9.1	71.9%	6.3%	*****

Sources: wsj.com. 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 warrant their short interest, but they might also be stricken by short-term troubles. Only Foolish due diligence will tell you for certain; our 170,000-strong CAPS community offers just such a good place to start.

The short list
Femtocells are small, cellular base stations designed to be used in homes and office buildings, connecting with a service provider's network through a broadband connection. Think of it as Wi-Fi for your cell phone. Although all the hype in mobile communications these days surrounds 4G networks, femtocells are going to be a primary bridge for many years.

According to Qualcomm (Nasdaq: QCOM  ) , we have decades yet before we experience peak 4G device volume deployment, meaning it will be coexisting with 3G networks for a very long time. As a result, femtocells will be a necessary component for getting those much-advertised high-speed connections to users in indoor settings. Qualcomm is teaming up with privately held Continuous Computing to provide femtocell software for its small wireless base stations, as are Broadcom, Texas Instruments, and others.

Spanish telecom provider Telefonica also sees the value in deploying the technology and has contracted with Alcatel-Lucent (NYSE: ALU  ) to extend 3G coverage in indoor locations and high-traffic public areas.

As a solid dividend payer, CAPS member jbolley figured the drop in Telefonica's stock price last month was a good time to pick up some shares, but you can give your own perspective on the Telefonica CAPS page as to whether its femtocell investment is worth the cost.

A blackout in value
The private-equity folks at Blackstone Group haven't exactly had an easy go of the public markets since their 2007 IPO. The stock hasn't ever traded higher than the offering price, though it didn't mean insiders weren't able to cash in on the transaction. As Rich Smith reminds us, the proceeds the investment company received from going public went to pay out the employees. At least someone made some money.

Lately, Warren Buffett has been boxing private-equity firms around the ears, and the courts resurrected a shareholder lawsuit against Blackstone stemming from its IPO and examining whether it omitted material information about two of its investments. It was the market heyday back then, though, and Fortress Investment Group (NYSE: FIG  ) , which also went public around the same time, has been sucking wind ever since as well.

Although Blackstone still trades below its IPO price, it's up by more than 80% from its recent July lows and has quadrupled from the nadir it hit during the depths of the recession. With 84% of CAPS members rating the PE specialist to outperform the market, it appears they believe that an improving economy will provide more opportunity for bringing other companies to market more successfully than its own effort.

Squeezed to death
Even though Noble will drop to become the third largest offshore oil and gas driller after Ensco (NYSE: ESV  ) makes its proposed $7 billion acquisition of Pride International, the deal indicates the value that can still be found in the sector, after the Obama administration crippled the industry with its moratorium on drilling.

Now that the second moratorium has been lifted, there may be greater opportunities for growth, even though signs show that permitting has been slow. Noble has shown itself to be particularly adept at creating shareholder value and beating the competition.

CAPS member Batting450 says the Gulf oil spill that sparked the moratorium had nothing to do with Noble, but that didn't stop the market from foolishly punishing the stock.

Gulf spill wasn't their fault, but their stock had to pay the price? Silly. They are undervalued now.

Drill down deeper on the Noble CAPS page for even greater insights into this excellent drilling prospect.

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 or short 'em? May the best argument prevail!