Beating Back the Short Attack

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, aiming to turn their pessimism into potential profits.

This week, let's look at companies on the Nasdaq exchange with the largest decline in the number of shares sold short. Combining that with the collective intelligence of Motley Fool CAPS, we'll see which of these firms Fools believe have the power to make short work of short sellers.

Source: wsj.com. Share counts in millions. Float is shares outstanding, minus shares controlled by insiders, restricted stock and shares held by 5% owners.

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 115,000-strong CAPS community just offers a good place to start.

The short list
With their merger completed, the integration process of the two satellite-radio giants into a single Sirius XM Satellite Radio begins in earnest. While that's going to mean new equipment sales so subscribers can receive both signals, there are also a host of structural problems, such as equipment hardwired into automobiles, the costs associated with obtaining both on-air personalities and subscribers, and reducing the ongoing expenses of both entities. So even as the immediate threats recede, there are additional hurdles this monolith must now surmount.

Yet CAPS member marcmac2228 figures the integration will eventually pay off in the form of reduced overhead that will let the industry flourish:

Finally merged. 1-2 years of shaking out the details and aligning the management teams before this thing takes off. combining debts and leveraging assets with XM was the final selling point. satellite radio is not going away

When Ciena (NASDAQ:CIEN) scared investors witless with a warning, Cisco investors apparently ran for the exits in terror. Apparently the whole tech infrastructure was going to implode as a result. Yet CAPS members aren't quaking; InvestorDeb sees this as an opportunistic time to pick up shares:

Lately, this stock has been beaten with the ugly stick, with today’s selling rationale being attributed to [Ciena] lowering their guidance. I see this as opportunistic for [Cisco], which I believe will pick up market share from competitor’s reporting weakness. Cisco is the dominant player in switches and routers and is benefitting as corporations try to save money and upgrade existing networks. It is also seeing strength in video conferencing, which has gained acceptance as travel costs and budgets come under increased scrutiny. [Cisco] has a strong brand and its prime positioning allows the company to continue to see growth even in challenging times.

It's the same macroeconomic weakness that has weighed on Intel's shares, as well. IT spending is being curtailed in the wake of the economic storms roiling the markets. Yet CAPS member Bristinwolfsong thinks the company's stability as a dividend-paying blue chip is being overlooked by the market:

growing dividend seems to be unnoticed by many. Its big growth days are past but it could remain a solid blue chip player with a nice payout over the very long term

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!