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 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.


Shares Short Dec. 31

Shares Short Dec. 15

% Change

%  Float

CAPS Rating (out of 5)

Cypress Sharpridge Investment (NYSE: CYS)






Resource Capital (NYSE: RSO)






Lloyds Banking Group (NYSE: LYG)






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
Ben Bernanke's latest round of quantitative easing was supposed to lower interest rates, but instead formed a new asset bubble: stocks. The Fed chairman is trying to spin that as a net plus, an indication of renewed and strengthened economic activity, but has he just pumped more money into the economy without any real change in the underlying foundations?

The market is at levels it hasn't seen since 2008, but housing's still a mess, unemployment is still rampant, and business remains mired without gaining any traction.

REITs like Cypress Sharpridge Investment, Resource Capital, and American Capital Agency (Nasdaq: AGNC) benefit from the Fed's low-interest rate policies because they can borrow money for next to nothing and profit from the interest rate spreads on the mortgage-backed securities they invest in. They're also able to offer eye-popping dividend yields that offer an alluring, but exceptionally dangerous attraction to investors.

CAPS member kevinewinters says hate the game, don't hate the player when looking at Cypress. It's working the system well to its advantage, and those of investors:

capital raised deployed at higher rates, mortgage rates rising, it is diluted from the two offerings, but will work out over next six months

ParisHgtsBruce says the highly anticipated meltdown in the commercial mortgage market (and I was one of those waiting for the other shoe to fall) never materialized, leaving Resource Capital in a better position from a more becalmed market:

The wildly forecast downturn in commercial real estate did not materialize. The housing market seems to be leveling off and will most likely continue along a rocky bottom. Although the fed has talked and push rates down, the market seems to have calmed and may be stabilizing at normal levels. Solid companies not overly involved in the housing sector should continue to perform well and provide good dividends

The shorts could be piling in here because they expect that, sooner or later, Bernanke's printing presses are going to get turned off. If the U.S. economy is as dependent on government stimulants as much as critics believe, they might be thinking the crash is coming sooner rather than later. If so, watch out below!

Squeezed to death
The stability of the financial markets is about to get stressed out again, and it's weighing on British banks like Lloyds Banking Group and Barclays (NYSE: BCS) since Britain will reportedly be the first testing ground for the IMF's new bank stress tests.

Despite previous tests that showedd financial institutions here and abroad were generally sufficiently capitalized, Standard & Poor's just released a survey that said 30 of the world's largest banks, including Bank of America (NYSE: BAC), do not have the resources to sustain themselves through another crisis.

Investors in Lloyds -- and I'm one -- shouldn't be too concerned. Along with Royal Bank of Scotland (NYSE: RBS), it has been drumming up support for investors to buy the U,K. government's stake in the banks, an indication they're well on the way toward recovery. The government took a 42% ownership stake in Lloyds and a 84% position in RBS at the height of the financial crisis, and now it appears it's getting ready to put them back in the hands of private investors, where they belong.

For Lloyds at least, CAPS member sarahj1000 thinks its situation has vastly improved and that will translate into a much higher stock price. I, for one, hope she's right:

Will be safe now that the worst of the UK economy is over plus 50% owned by gov't and has received bailout. Is selling off property in London to focus on core financial services and raise capital. Believe it will double by end of 2011 and could go over $20 in the next 2 to 3 years

You can see deposit your thoughts on the Lloyds Banking Group CAPS page and monitor its progress on the Fool's free portfolio tracker.

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!

The Fool owns shares of Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 

Fool contributor Rich Duprey owns shares of Lloyds Banking Group but does not have a financial position in any of the stocks mention in this article. You can see his holdings here. The Motley Fool has a disclosure policy.