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 profits.

These top companies on the American Stock Exchange had the largest percentage increase in shares sold 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
Sept. 30

Shares Short
Sept. 15



CAPS Rating
(out of 5)

L&L Energy (Nasdaq: LLEN) 3.0 1.9 59.5% 15.8% ****
American Capital Agency (Nasdaq: AGNC) 4.0 2.7 48.7% 8.3% ***
Gulf Resources (Nasdaq: GFRE) 2.4 1.7 42.0% 12.5% ****

Sources: Share counts in millions. NM = not meaningful.

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 170,000-strong CAPS community offers just such a good place to start.

The short list
Distance apparently does make the heart grow fonder. Seattle-based coal company L&L Energy has all its operations located in China. Given that country's voracious coal appetite, it would seem to have a desirable business. After all, Yanzhou Coal Mining (NYSE: YZC) surged yesterday on third-quarter earnings as the price of coal in China jumped 28% and Peabody Energy (NYSE: BTU) is banking on the industry being in the midst of a huge supercycle.

You can't find better demographics, according to CAPS member adhamhurani, who says L&L Energy is poised to reap a windfall as a result:

Coal , Coal , Coal ... china thurst for energy getting bigger in daily bases , the people of china republic is earning more and more money which in turn they spend on buying energy consuming basic and luxury products , china electricity production relies majorly on coal power plants , L&L looks to be promising company wishing to be important coal supplier

Only you can know whether this type of investment is suited for your portfolio, but you can add L&L to your My Watchlist page and have all the Foolish news and analysis about it aggregated for you in one place.

Its business is business
Investors in American Capital Agency are getting the full faith and credit of the U.S. taxpayer when they invest alongside the mortgage real estate investment trust (REIT). Externally managed by private equity firm American Capital (Nasdaq: ACAS), American Capital Agency is a REIT whose investments in pass-through securities and collateralized mortgage obligations have their principal and interest guaranteed by government agencies like Ginnie Mae, Fannie Mae, and Freddie Mac.

While the public's faith in the government's credit may be at its nadir, with a yield north of 20%, American Capital Agency is a REIT investors are having little trouble endorsing. Since it is releasing earnings today after the market's close, CAPS member aronbert  believes it will generate even more interest very soon:

As REITs continue to outperform the average stock I feel that we are going to see a REIT such as AGNC attract more than enough attention with the healthy return that we will see even more growth in a short period of time.

Squeezed to death
When the new short interest numbers are released, we're likely to see that the short-sellers have abandoned Chinese bromine manufacturer Gulf Resources. Shares fell 30% throughout September, but have since been marching north, rising 33% in October.

With strong demand at home and international peers like Albemarle (NYSE: ALB) and TETRA Technology finding new strength globally, Gulf Resources is bound to make short work of the short interest.

CAPS member MarketMage thinks management's interests are aligned with outside shareholders. Let us know what you think on the Gulf Resources CAPS page.

Don't sell yourself short
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Then share your views with the CAPS community: Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!

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.

Fool contributor Rich Duprey currently does not own any stocks as you can see here. The Motley Fool has a disclosure policy.