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 American Stock Exchange had some of 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.

Sources: 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
With silver miner Alexco Resource making the transition from developer to producer by achieving production at its Bellekeno mine in the Yukon Territory, it's become one of the top stocks to watch this year for the Fool's resources guru Christopher Barker. Silver Wheaton (NYSE: SLW) is watching Alexco move off on its own as well, since Silver Wheaton holds a silver stream for 25% of Alexco's production from the Keno Hill district.

Alexco confirmed the extension of the Lucky Queen deposit at Keno Hill last month as well as an extension at Bellekeno the month before, and Bellekeno is producing at levels that satisfy requirements Silver Wheaton imposed at the time of a silver-purchase agreement with Alexco.

Short sellers may be looking at the doubling in price of Alexco's stock as their reason for piling on here, but CAPS member altruria thinks silver has a long runway yet before it, and along with gold miner Northgate Minerals (NYSE: NXG), another Barker favorite, it's ready for takeoff:

Silver is still in the middle innings and will undoubtly move some juniors into major league players. [Northgate] looks to be one of the better prospects.

Mine the opinions on the Alexco Resource CAPS page and see whether you think it makes the grade.

Mama grizzlies
Last year Kodiak Oil & Gas expanded its presence in the Bakken shale play in North Dakota, signing two deals that gave it additional acreage in the important Williston Basin. Last week, Kodiak said that despite some severe winter weather conditions, the area was producing approximately 2,700 barrels of oil equivalent per day, in line with what it previously projected.

It currently operates two rigs in the area, with a third scheduled for the first quarter of 2011. ExxonMobil (NYSE: XOM) spud another well in Williston that Kodiak has a 50% interest in through a joint venture partnership.

Last month, shares of Kodiak surged after announcing it was offering 25 million shares, five million more than it previously said, because of the demand for its stock. Kodiak's shares have soared 140% over the past year, so the shorts might be thinking they're due for a pullback. While the shares have given up 3% so far this year, 94% of the CAPS members rating the oil and gas company think it's still going to pump out market-beating returns.

You can see whether Kodiak Oil & Gas is as tenacious as an old grizzly by tracking its progress on the Fool's free portfolio tracker.

Squeezed to death
Chinese exports soared by double-digit rates in December, surprising analysts by the strength, particularly in the face of the Chinese government clamping down on the economy. That could explain in part why the shorts have chosen Puda Coal to attack.

Puda specializes in producing coking coal, a key component in the steelmaking process. In reporting its earnings yesterday, Alcoa (NYSE: AA) said it anticipated demand growth for aluminum would fall to just 15% this year, down from 21% growth in 2010. Aluminum, like steel, is important for the construction industry as well as the auto markets. China recently raised the sales tax on cars 33% as it tries to wean the government off supporting auto industry growth.

CAPS member pprimo is unconcerned at the moment, and while the company is new to the scene, pprimo figures Puda will benefit from its growing reserves:

whats not to like about a metallurgical grade coal supplier in china?

Its an unproven operator, but they seem to be amassing nice coal reserves. They just did a secondary at 12.00 providing funds for even more mine consolidation.

Add Puda Coal to your watchlist if you think it's the Chinese economy will continue to be an integral part of the world economy's recovery.

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!