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
Here's a list of stocks on the New York Stock Exchange with the largest increases in short interest in the past two weeks. We'll 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 continue making short work of short sellers.


Shares Short-Nov. 30

Shares Short-Nov. 15

% Change

Total Shares Out

% Ttl Out

CAPS Rating (out of 5)

Fannie Mae (NYSE:FNM)







Mylan (NYSE:MYL)







Countrywide Financial (NYSE:CFC)







Washington Mutual (NYSE:WM)







Freddie Mac (NYSE:FRE)







Shares short data courtesy of NYSE. 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 still have some serious problems that warrant the once-high short interest. Maybe not. What do you think? Will they be squeezed?

Tapping the CAPS advantage
Over on CAPS, more than 76,000 investors are looking over these same stocks. Some they like, some they don't, and they all vote on how they feel about them. Sometimes, though, the stocks CAPS players like cross swords with those that short sellers don't.

This week's list of companies is once again dominated by companies related to the housing industry, which probably doesn't surprise investors much. The homebuilders and mortgage finance companies remain despised by the markets -- and apparently by the CAPS community, too. All but Washington Mutual rate only one star.

Getting mileage with Mylan
Fannie and Freddie are new to our list, ushered in by revelations of new mortgage problems. Meanwhile, Mylan makes the list thanks to lingering concerns that it may have overpaid for the generics business of Merck KGaA. The ratings agencies have chopped the drugmaker's ratings further into junk territory, but with many pharmaceutical companies losing patent protection on billions of dollars' worth of blockbuster drugs, generics will remain a growing force to contend with. Mylan has won FDA approval for a number of generic drugs lately, and coupled with an aging population, that has many CAPS investors convinced that the company's current low price is short-sighted.

Earlier this summer, top-rated All-Star Gtrinvestor, who sports a 99.84 player rating, considered many of these issues. Though he saw challenges ahead, he foresaw the Merck acquisition ultimately paying off:

Many of the same reasons I voted for Teva Pharmaceuticals (NASDAQ:TEVA) to outperform. In addition, the low forward P/E is nice @ < 12, coming [off] a historical P/E of about 18. While short term I think that they will have lots of "special charges" associated with its acquisition of the Merck generics unit, in the long run they have the wind at their backs.

Financing the deal will put a strain on their treasury department to be sure, and HR will have quite a time integrating this monster; however, there are a lot of fixed costs in this industry (including significant legal costs) that are best to have spread out over a larger revenue base. Realistically, you have to be one of the top 3 in this industry to truly make serious money, and to have negotiating leverage (with governments to allow their drugs to be allowed in their countries, insurance companies to allow their generics to be covered under their plans, etc.).

I'm a little hesitant to actually pull the trigger on this one right now for my own personal investing (as I have a bit with TEVA already and I am most heavily invested in deep water oil drillers which appear to be a great value), but I'm torn that I will miss the big upside if this one starts hitting (need to buy into fear to make serious money, which is clearly where this stock stands right now). However, b/c there is no capital allocation decisions to make in CAPS, I'm "adding" this one to my CAPS long-term outperform portfolio!

Speak up
You've heard from the CAPS All-Stars; now it's your time for a star 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!

Fannie Mae is a former recommendation of Motley Fool Inside Value. Washington Mutual is an Income Investor selection. Try any of our market-beating Foolish newsletters free for 30 days.

Fool contributor Rich Duprey owns shares of Fannie Mae, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. There's no shortcut around the Motley Fool's disclosure policy.