Everyone loves a winner. It's reasonable to assume, then, that everyone hates a loser. Yet with investing, that's not always the case.

Contrarian investors love to pick through stocks that others have cast away. Value investors are the garbage-divers of the marketplace. Conversely, when stocks have a big run-up, some investors like to bet against them. They're called short-sellers, and they bet that a stock is primed for a fall.

What goes up must come down
Each month, we review the stocks on the Nasdaq exchange with the largest short interest positions. That list hasn't changed much month to month as of late. So it might be more interesting to see some companies that are a little lower on the list, since those companies change more frequently. Then we'll once again turn to the collective intelligence of the Motley Fool CAPS community to learn which of these stocks -- if any -- Foolish investors think have the power to make short work of short-sellers.


Shares short, Sept.

Shares short, Aug.

% Change

Total shares out

Sept. % short

CAPS rating (out of 5)








Sun Microsystems (NASDAQ:JAVA)




























Shares-short data courtesy of Nasdaq. CAPS rating courtesy of Motley Fool CAPS. Share counts in millions.

Of course, this isn't a list of stocks to buy -- or short! Maybe these stocks have some serious problems that warrant the high short interest. Maybe not. What do you think? Will they be squeezed?

Tapping the CAPS advantage
Over on CAPS, more than 65,000 professional and novice investors are looking over these same stocks. Some they like, some they don't, and they vote on how they feel about them. Sometimes the stocks that CAPS players like cross swords with those that short-sellers don't.

Most of the names on this month's list are seeing decreases in their short positions from month to month, but as we saw last time out, Sun Microsystems had a large jump in the number of shorts. Maybe they smell blood in the water as Sun asks shareholders to approve a 1-to-4 reverse stock split.

As Fools know, a stock split is a relatively meaningless event, one that perhaps best signifies management's bullish sentiment. But a reverse stock split is often a sign of desperation. Sun seems desperate now, saying that it wants to boost its shares to give institutional investors the chance to buy the stock (most are prohibited from buying low-priced stocks like Sun's). But the company also hopes that the move will give its stock a valuation similar to its peers. Um, guys? The market's supposed to do the pricing, not management through artificial reverse stock splits. Experience shows that propping up stocks with a reverse split usually isn't successful. Often, stocks even fall back to where they were before. The shorts undoubtedly sense this.

More than 1,200 professional and novice investors have weighed in on the Java platform maker, with fully 87% seeing it outperforming -- with almost one-quarter of them being CAPS All-Stars. CAPS investors also are warming up to the stock more as it has moved up recently to a three-star rating, a feeling that we can track by watching its CAPS trend.

CAPS All-Star dplindeman bullishly believes Sun is something of a stealth company these days, and that it will gain from a single-minded focus on its Java application (as represented by its stock ticker change).

[Sun is] one of those weird stocks that has a nice niche in their business that nobody seems to notice. They run a ton of internet and technology applications. I think the symbol change to JAVA is gonna raise the profile, and interest (buyers). Just from the tech bubble of the 90's we know stocks can rise by symbol alone. And we are doomed to repeat history.

Industry analysts and researchers at Netscribes, however, see real problems with its ability to compete against its rivals, regardless of its desire to have its shares valued like theirs.

The management expects the next quarter to be seasonally challenging and has been facing slow growth in the U.S and the U.K market, along with softening of orders in the month of March. Though it is not losing business to competitors, the company has delayed its dispatches, adding to its woes. A large portion of its operating expenses are denominated in local currencies and it is facing negative impact from currency changes. Sun lacks the strength to compete in the long term with the likes of IBM (NYSE:IBM), Hewlett Packard (NYSE:HPQ) and Dell. Moreover operating cost is skyrocketing for the company and it does not have products to offer in the low end. Summarizing the above mentioned facts it looks sensible to avoid the stock for 2007.

Speak up
You've heard from the CAPS All-Stars. Now it's your turn. Tell the CAPS community what you have to say. On Motley Fool CAPS, your opinion counts just as much as the short-sellers'. Tell us what you think: Squeeze 'em till it hurts, or short 'em till the sun don't shine. May the best argument prevail!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.