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 profits.

These are the top companies on the Nasdaq stock exchange with the largest percentage increases in shares 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
The silver lining some investors hope emerges from the black cloud of Japan's nuclear reactor crisis is greater support for solar energy projects. The problem is that, as analysts note, it's not as simple a trade-off as that. Nuclear power plants running 24 hours a day produce five times the electricity of solar plants of the same capacity. Of course, with a solar plant, there's no fear you'll contaminate the earth, water, and air, making the environment uninhabitable for generations to come.

But solar is facing other troubles, too, such as declining taxpayer subsidies to prop up the industry. Last month Canadian Solar's stock plummeted after said earnings were hurt as Italian customers postponed their purchase decisions as the government mulled how it was going to subsidize the industry. All across Europe, governments are reevaluating their support.

The change in temperament has affected other solar plays, too, including Energy Conversion Devices (Nasdaq: ENER), which announced it will reduce production of its thin-film solar products from an estimated 27 megawatts to 33 megawatts down to 25 megawatts, and SunPower (Nasdaq: SPWRA), which analysts identify as perhaps the most exposed to the situation there.

Vertically integrated Canadian Solar, though, which realizes 70% of its revenues from Europe, has been expanding internationally to reduce the concentration. Last year Europe accounted for over 90% of revenues.

Of the CAPS members rating the solar shop, 96% see it still outperforming the broad market averages. While Europe's dramatic shift in industry support probably isn't factored into many of the ratings yet, you can shine a light on the Canadian Solar CAPS page and let us know how the upheaval impacts the industry going forward.

No small thing
Ever since Google (Nasdaq: GOOG) got religion and stopped being complicit in China's censorship of its people, its presence in the country continues to be marginalized. Its share of the search market dropped to under 20% from its peak of more than 35% in 2009, its Gmail service has become difficult to use as the government meddles in its functionality, and Google itself has been attacked by Chinese hackers. At the same time, Baidu.com (Nasdaq: BIDU) now owns three-quarters of the market, up from 58% in 2009.

The latest blow, though perhaps not completely unexpected, was Sina dropping Google as its search engine and replacing it with its own technology. For a country where 420 million citizens use the Internet, according to the China Internet Network Information Center, Sina remains a popular destination.

Sina offers a controlled Twitter-like service (Weibo) for a country that bans the real thing, along with other social media outlets. Analysts speculate it could even profit by spinning off the service. As CAPS All-Star Gordogato points out, it simply has access to more potential users:

Growth of the Internet will be huge in China, and Sina is poised to capture a lot of the revenues from that growth. The Weibo microblog service they run will end up bigger than Twitter simply because there are more potential users in China than the US.

Add Sina to your watchlist to see how things develop.

Squeezed to death
Investors are shrugging off the implication of a difficult energy market for driller Hercules Offshore. Ever since Seahawk Drilling went bankrupt and Hercules said it would acquire 20 jackup rigs, the driller's shares have been on a tear, almost doubling in value in 2011.

Yet with more than half its fleet cold-stacked, Hercules might find conditions not so ripe for exploitation. Investors, though, may be focusing on the driller being a more financially sound company after renegotiating its debt covenants and signing a new joint venture.

While less than 60% of the analysts covering Hercules think it will outperform the markets, over 96% of the 1,678 CAPS members rating the driller think it can. Add the stock to the Fool's free portfolio tracker to find out who prevails.

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!