Three months of stock gains haven't done much to silence the grumbling bears. Pessimistic speculators are still shorting shares of companies that they see heading lower in the near term. If they're right, then selling a stock short and buying to cover a position later at a lower price can be lucrative. If they're wrong, they'd better be quick with the ripcord before the margin calls come.

I'm an optimist by nature, but shorts don't bother me. Given the generally higher equity prices, they may very well have valid bearish arguments now that valuations have headed higher, especially on companies reporting in with lower earnings.

My one advice for shorts is that they pay attention to short interest ratios, because the only thing worse than being a pessimist is being a lemming caught in a short squeeze.

Here comes the squeeze play
The short interest ratio is an easy metric to figure out. Take the number of shares currently being shorted in a particular company, and divide that by the average daily volume. Theoretically speaking, the result is how many days it would take for shorts to close out their positions, given current trading levels.

This figure is different from just the sheer number of shares held short. Sirius XM Radio (NASDAQ:SIRI) has 147.4 million shares sold short, more than any other Nasdaq-listed company. That's a huge number, but when you factor in the satellite-radio operator's low price per share and the average of more than 67 million shares traded daily, the stock has a reasonable short interest ratio. It would take a ratio of a little more than 2 to cover all of the satellite-radio bashers.

Let's move on to a few intriguing stocks with unusually high short interest ratios.


Shares Short

Daily Volume

Short Interest Ratio

Gander Mountain (NASDAQ:GMTN)




Grand Canyon Education (NASDAQ:LOPE)







Barnes & Noble (NYSE:BKS)




Source: The Wall Street Journal. As of May 15.

Gander Mountain bills itself as the nation's largest outdoors-lifestyle retailer. It reports its quarterly results after the close Wednesday, so the last snapshot we have of the chain is from the quarter that ended in January. Turns out that Gander Mountain held up far better than most retailers during this past brutal holiday season. Comps fell by just 0.2%, with declines in big-ticket items such as boats, ATVs, and power sports offsetting gains in firearms and footwear. Earnings more than doubled, as a result of healthier product margins and prudent cost-cutting.

This is a seasonal business, so analysts see Gander Mountain posting a loss tomorrow. However, they also see a return to profitability for the fiscal year -- a welcome turnaround after the company's fiscal shortcomings in recent years.

Grand Canyon Education is an online educator that went public in November. Bears are hazing the freshman, but the company is profitable, is growing quickly, and has blown past Wall Street's profit targets in its first two quarters as a public company. isn't profitable like Grand Canyon is, although a commitment to keeping costs in check has also delivered back-to-back quarters of market-thumping results. Sure, Overstock isn't growing as quickly as market darling (NASDAQ:AMZN), and its brazen entry into online auctions a few years ago hasn't birthed a worthy eBay (NASDAQ:EBAY) rival. However, it's hard to bet against an online retailer named at a time when consumers are turning to closeouts and clearances to get more bang for their bucks.

Barnes & Noble is another company that obviously isn't growing as quickly as Amazon is. But that's fine. As the leading superstore concept devoted to books, B&N has the stamina to stick it out as smaller bricks-and-mortar peers go underwater. The retailer's springtime acquisitive push into the booming e-books industry is also interesting.

Check your pessimism at the door
No, these companies aren't perfect. and Gander Mountain posted losses last year, Grand Canyon has the stigma of being a busted IPO, and Barnes & Noble -- despite its recent push into the digital realm -- will suffer if the electronic delivery of books overtakes physical retail.

However, the problem in dissing these four stocks is that the bears don't have a lot of elbow room. When a squeeze comes, the bears make a beeline for the exits to cover their shorts at the same time, and the stiff short interest ratios on these companies mean that a squeeze is always a possibility.

You don't want to be on the wrong end of a short squeeze, especially when three months of stock gains can just as easily become four.

Some related reads to check out before it's too late:

If you prefer to bet on winners -- instead of betting against losers -- dive into the short-stuffing picks that the Rule Breakers growth stock research service aims to unearth. and eBay are Motley Fool Stock Advisor recommendations. eBay is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Unlike Randy Newman, longtime Fool contributor Rick Munarriz doesn't have anything against short people. Never mind that Rick isn't that tall himself. He owns no shares in any of the companies in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.