Beating Back the Short Attack

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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, we'll take a look at companies on the Nasdaq Stock Exchange with the largest decrease in shares sold short. Combining that with the collective intelligence of the 130,000-plus investors in 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. 27	Shares Short -Feb. 13	% Change	%  Float	CAPS Rating (5 max)
Indevus Pharmaceuticals (Nasdaq: IDEV)	1.3	2.6	(49.9%)	1.9%	***
ASM International	0.4	0.8	(46.7%)	1.0%	*****
Providence Service	0.3	0.5	(39.3%)	3.3%	***
American Ecology	0.5	0.7	(37.9%)	2.7%	*****
Charter Communications	33.8	54.2	(37.6%)	9.2%	**
Dell (Nasdaq: DELL)	31.7	50.6	(37.4%)	1.9%	**
Forrester Research (Nasdaq: FORR)	0.8	1.2	(37.3%)	5.1%	*****
Insituform Technologies (Nasdaq: INSU)	3.8	5.9	(36.4%)	10.3%	***
Thomas Properties Group	0.5	0.7	(36.0%)	2.1%	*
i2 Technologies (Nasdaq: ITWO)	0.9	1.4	(35.5%)	5.5%	***

Sources: WSJ.com, CAPS. Share counts in millions.

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 CAPS community offers a good place to start your research.

The short list
Companies looking for a handout don't have to be in dire financial straits, and plenty of going concerns have been lining up for the government dole, and not all at the federal level.

In Akron, Ohio, officials are committing $200 million to help Goodyear Tire & Rubber (NYSE: GT) remodel its campus and rebuild its headquarters. North Carolina shelled out tax dollars to attract Google (Nasdaq: GOOG) and Chinese computer maker Lenovo.

Dell also got into the act of accepting government help in Winston-Salem, N.C., but both sides may be ruing the decision. In exchange for Dell investing $100 million over five years and hiring 1,700 workers, the city and county where Dell's facilities are located would pay more than $14 million in site-prep costs, and each pay between $500,000 and $800,000 a year directly to Dell. 

If the computer maker met all goals, it would reap as much as $13.9 million from the city and as much as $8.8 million from the county over the 15-year period of the agreement.

But because of the recession and the slump in computer sales, Dell is reportedly laying off as many as one-quarter of the workers at the North Carolina plant. Dell is able to cut as much as 40% of its labor there without triggering the agreement's clawback provisions. But meeting the conditions of a subsidy pale in comparison to the larger operational issues that the company faces.

CAPS member TMoney101 wrote in January that the commoditization of computers will serve only to keep Dell's margins on the downward slope:

Computers are too cheap and have become a commodity. I don't believe in the "netbook" craze and until the next big thing comes out of this industry to make people spend money, I see nothing but declining margins. Oh, and I almost forgot to mention that the economy is awful.

Yet at some point a company can become just too cheap to ignore. And when it still generates prodigious amounts of cash, as Dell does, investors including CAPS All-Star aj350 think it can't be passed up:

Dell is super cheap - i wont buy their products, because I think there are usually better alternatives, but no one can deny that they are still competitive, have a strong brand name among youngsters and corporations, and that it is undeniably cheap! ... Michael Dell has bought back profitability by concentrating on what they do best - build computer systems. In the current environment shares are undervalued by 50%. In an environment where growth returns, shares are probably closer to being undervalued by almost 100%.

Don't sell yourself short
On Motley Fool CAPS you can 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 til it hurts, or short 'em til the sun don't shine? May the best argument prevail!