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 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
Although Endeavour Silver's shares surged the other day after reporting record earnings, the stock had previously peeled back about 30% from its 52-week highs after the silver bubble burst. Once hitting almost $50 a share, it now goes for just $35 an ounce a mere few days later.

But was it really a bubble? When it comes to the miners, not at all! As Endeavour showed, silver miners have production costs in the range of $4 to $8 an ounce. Whether silver is trading at $50 or $35 they're making a handsome profit. Endeavour has cash costs just under $5 while Pan American Silver (Nasdaq: PAAS) has a range between $7 and $7.50. Coeur D'Alene Mines (NYSE: CDE) offers up cash costs for a paltry $4.10 an ounce. Their profits might be even higher at $50 an ounce, but no one's going to be crying if it trades down a little.

CAPS member AssetReset is looking for a rebound. Silver may have moved too far, too fast on the way up, but the plummet back to earth was equally overdone: "Silver Silver Silver, wayyy tooo beat up on this last pull back. Adopted IFRS, one time hit to income, up, up, and away this year"

You can dig into the company now on the Endeavour Silver CAPS page and let us know whether you think it's fit enough to succeed.

No small thing
Although some question the wisdom of utility PPL making acquisitions, the consolidation trend is in full swing. We noted previously that Duke Energy was buying Progress Energy, and Exelon (NYSE: EXC) wants to buy Constellation Energy, but two Kentucky utilities PPL bought last year were a good part of the reason it saw a 64% jump in first-quarter profits and underscores the support the CAPS community put in it.

Yet as nice as the profit picture was, easily surpassing analyst expectations, revenues did decline more than what Wall Street had been forecasting. For CAPS member wildbill40, though, additional acquisitions can power up even better profits for the utility: "cheap and profitable with a nice dividend and possible synergies from acquisition."

You can add it to your watchlist to see whether there's any utility to be derived from making more purchases, and let us know your thoughts on the PPL CAPS page.

Squeezed to death
Unless the entire country is going bankrupt, you'd think all the negative sentiment was already priced into the shares of Bank of Ireland. Besides, both it and Allied Irish Banks (NYSE: AIB) are the primary beneficiaries of the government's plan to bail out the financial industry. And after the plan was first revealed that they would survive, even as smaller institutions like EBS Building Society and Irish Life & Permanent were folded into their operations -- thus giving BI and AIB a brief boost -- the stocks have continued their slide.

The problem is indeed Ireland itself. Irish Times recently reported the government had to slash its estimates for economic growth from prior (already dismal) forecasts. Gross domestic product that was seen limping 1.8% higher just this past December is now expected to grow no more than 0.8%. Unemployment will also be higher as will inflation.

The people aren't taking it lightly either, nor are they putting their faith in the government to rectify the banking situation. Deposits in all Irish banks dropped 16 billion euros in March from the month before, and total deposits are about one-third lower than where they stood in August. As Greece is all too clearly proving, European Union bailouts don't guarantee recovery.

CAPS member DarrylHall admits an investment in Bank of Itreland is more of a gamble than anything else.

Investment in any Irish bank is a gamble -- with all but AIB and IRE now fully nationalized. AIB may still become consumed (in fact, I predict they will.) However; if only for political reasons, I believe IRE will survive as an independent entity. For this reason, I've gone long on IRE; while placing an equal short on AIB.

Add the stock to the Fool's free portfolio tracker to find out if it's able to prop up its value based on more than hope.

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!