Typically, your average investor manages his portfolio by "going long" on his holdings; he buys stock in the hopes that it will eventually appreciate in value. When it goes up, he sells, and in the process turns a profit. But when an investor "goes short," he defies conventional investing wisdom -- he's betting on his stock to lose. Because instead of buying low to sell high, he's selling high to buy low.

A short seller borrows shares from other investors and sells them on the open market, then closes the short by buying back the same number of shares he borrowed. If he can buy back the stock at a lower price, then he turns a profit off the difference.

When there's an excess of short positions on a particular stock, the result is a bullish effect on the stock known as a "short squeeze" -- lack of supply and over-demand for the stock forces the price upward. Unfortunately for them, short-sellers take on a great deal of risk because they have infinite downside potential -- if the stock keeps rising, they keep losing.

But since short-sellers inevitably have to buy back the shares they borrowed at some point in the future, they actually limit the downside of the stock itself.

So could short-sellers' loss be your gain? You be the judge: Check out this list of short squeeze candidates ...

We started with a universe of stocks with excessive short interest, and then narrowed it down by only focusing on companies with solid financial strength, based on the quick ratio and interest coverage ratio.

For each company we'll list the percentage of shares that have been shorted (Float Short). We'll also include each stock's short ratio, which expresses the total number of shorted shares as a multiple of average daily volume.

Use this list as a starting point for your own analysis. Click here to access an interactive report on these stocks.

Company

Float Short

Short Ratio

Quick Ratio (MRQ)

Interest Coverage (MRQ)

Cash America International (NYSE: CSH)

16.38%

19.17

3.31 vs. ind. avg. of 1.1

7.49 vs. ind. avg. of 0.64

Equinix (Nasdaq: EQIX)

17.80%

9.72

2.97 vs. ind. avg. of 2.35

2.23 vs ind. avg. of 0.44

Fair Isaac (NYSE: FICO)

16.02%

17.07

2.89 vs. ind. avg. of 2.35

5.68 vs. ind. avg. of 0.44

Alliance Data Systems (NYSE: ADS)

34.53%

15.43

2.65 vs. ind. avg. of 2.35

3.57 vs. ind. avg. of 0.44

Under Armour (NYSE: UA)

18.82%

9.03

2.35 vs. ind. avg. of 1.35

9.44 vs. ind. avg. of 0.72

Cabela's (NYSE: CAB)

25.65%

25.82

2.23 vs. ind. avg. of 1.13

5.12 vs. ind. avg. of 0.93

NutriSystem (Nasdaq: NTRI)

35.64%

17.34

2.12 vs. ind. avg. of 0.91

5.17 vs. ind. avg. of 0.19

The Children's Place (Nasdaq: PLCE)

25.63%

8.93

1.99 vs. ind. avg. of 1.26

11.72 vs. ind. avg. of 10.57

Interactive Chart: Press Play to compare performance and market cap for all the stocks mentioned above.


Kapitall's Eben Esterhuizen and Alicia Sellitti don't own shares of any companies mentioned.

Under Armour is a Motley Fool Rule Breakers recommendation. Under Armour is a Motley Fool Hidden Gems pick. The Fool owns shares of Under Armour. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.