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Do the Shorts Know Something You Don't?

Rich Duprey
January 5, 2012

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.

These top companies on the Nasdaq had some of the largest percentage increases in shares 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.


Shares Short, Dec. 15

Shares Short, Nov. 30

% Change

%  Float

CAPS Rating (out of 5)

OmniVision Technologies (Nasdaq: OVTI  ) 5.99 4.05 47.8% 10.3% *****
Spreadtrum Communications (Nasdaq: SPRD  ) 4.66 2.69 73.1% 9.6% **

Source: Share counts in millions.

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 180,000-strong CAPS community offers just such a good place to start.

An ugly picture
With the drubbing OmniVision Technologies took last year as Apple (Nasdaq: AAPL  ) cut the iPhone pie into a few more slices to let Sony take a piece, you'd think short sellers would relent in their attack. The stock lost more than half its value after OmniVision's CMOS sensor lost its exclusivity, just as mobile communications were going to make yet another bounce higher, with IHS iSuppli predicting the smartphone market to grow to 1 billion units a year in 2015.

The shorts seem to suggest that's not going to be the last of the woe that befalls the chipmaker. But while its current iPhone camera chip may be of lesser quality, the new upgraded BSI-2 ought to squelch any quality concerns. The company shipped 153 million units in the second quarter, and coupled with the cheap valuation the market is assigning OmniVision -- less than its book value and just 70% of its sales -- makes