Do the Shorts Know Something You Don't?

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 potential profits.

These top companies on the New York 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.

Source: wsj.com. 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
Let's start with the two banks on our list.

A contagion that once appeared contained now appears to be spreading wildly out of control. No longer is it focused on the sad financial situation of Anglo Irish Bank, which the Irish government had seized control of, but it has spread to Allied Irish Banks and the government itself. Allied Irish Banks' capital situation is approaching crisis levels, according to traders, and the government itself might default on its debt. Short-sellers are pouncing while there's blood in the water.

Irish bonds have fallen for 10 days straight as the crisis reaches a crescendo, and the focus returns to Ireland, Greece, and Portugal as the biggest scoundrels in the PIIGS mess. Compared to Allied and the problems racking Bank of Ireland (NYSE: IRE), the confluence of calamity at National Bank of Greece looks to be ebbing as support for austerity in the country was underscored by recent elections.

CAPS member aordinaryguy is banking on the "too big to fail" scenario to bail out Allied Irish Banks:

This bank will either get nationalized (and a complete loser) or come back strong and be a multibagger. I'm betting on the too big too fail multibagger scenario, but you better throw in a big batch of patience with this one, and I wouldn't bet the farm.

But maybe he's not thinking big enough. Instead of being too big to fail, maybe, as JPMorgan Chase (NYSE: JPM) has discovered, you've got to get so big you're actually "too global to fail." An article appearing in The New Republic suggests that while there might not be enough favorable currency and political capital here at home to bail out another bank, if your operations are truly global in scope, you may have grown to such a size that governments around the world have the incentive to keep you afloat.

CAPS member trysson might be suggesting National Bank of Greece has done just that sort of thing by persuading China to help prop it up:

I do own NBG. The dividend paid in October 2010 of .288 represented about 12 % against the per share price of $2.30. Naturally, I had to pay about 1/3 of the dividend to the Greek government but the resulting return was still a very respectible 8%. I was happy and pleased when I read that China will continue to support Greece and NBG by buying its paper. If both the EU and China cannot support this economy then perhaps I am wrong in my "Outperform" for NBG. I do not think so.

Only you can know whether an investment in these risky financial institutions is suited for your portfolio, but you can add Allied Irish Banks to your My Watchlist page and have all the Foolish news and analysis about it aggregated for you in one place.

Then head over to the National Bank of Greece CAPS page and deposit your opinion on whether there could eventually be a global backlash against bailing out bankers everywhere.

Squeezed to death
The renewed financial crisis is enough to drive you to drink, and Anheuser-Busch InBev would be grateful if you hoisted its products. The company reported that volumes fell 1.5% in North America while they were down 4.5% in Western Europe. What helped the brew master was a return to premium beer, which drinkers had fled during the recession. A-B said overall core profit rose 9.1% as premium suds, price hikes, and cost cutting made the best of an otherwise mediocre situation.

Brazil was a high point, as volumes jumped 12%, but overall results came in slightly less than what analysts had been expecting.

That resurgence in premium taste helped Boston Beer (NYSE: SAM), the maker of Samuel Adams, tap new sales growth of 14% over the year-ago period. Yet at 29 times trailing earnings, some investors might be put off by the premium price. Not that A-B is much better at 22 times earnings, particularly since Molson Coors (NYSE: TAP) goes for just 12 times profits.

CAPS member notUSA recognizes the lofty valuation, but thinks Anheuser-Busch deserves to trade at a premium, since drinking tastes are trending in its favor:

Tough choice..high P/E, BUT the world has a good reason to keep drinking, and hard liquor drinkers are trending to beer. This is also a defensive stock for another round of worldwide slowdowns.45% sales come from US, which could be a negative with $dropping, but growth in China and Latin America where they are more concentrated with their 55% sales overseas should grow faster with economies in Brasil, Chile, China, Mexico where they purchased other brewers.

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!