5 Stocks Under Attack

Everyone loves a winner, so it's reasonable to assume that everyone hates a loser. But in investing, that's not always the case.

Contrarian investors love to pick through stocks others have cast away. Value investors are the garbage divers of the marketplace. Conversely, when stocks have a big run-up, some investors like to bet against them. They're called short sellers, and they bet that a stock is primed for a fall.

What goes up must come down
Here's a list of stocks on the Nasdaq exchange that saw some of the largest increases in short interest positions in this month. We'll turn to the collective intelligence of the Motley Fool CAPS community to learn which of these stocks -- if any -- Foolish investors think have the power to continue making short work of short sellers.

Of course, this isn't a list of stocks to buy -- or short! Maybe these stocks still have some serious problems that warrant the once-high short interest. Maybe not. What do you think? Will they be squeezed?

Tapping the CAPS advantage
Over on CAPS, more than 75,000 investors are looking over these same stocks. Some they like, some they don't, and they all vote on how they feel about them. Sometimes, though, the stocks CAPS players like cross swords with those that short sellers don't.

Some of the names on the list probably aren't surprising. For example, the recent turmoil at discount brokerage house E*Trade suggests that its presence on the list won't raise any eyebrows. Yet while most of the names are familiar to readers of this column, some of them might be in for some spectacular jumps in price.

E*Trade's recent $2.5 billion cash infusion should shore up any doubts investors and accountholders alike had about its liquidity and ability to survive. That alone might cause the shorts to turn tail, helping to drive up the price. Yet Sirius, too, may be in for some long-awaited price appreciation, if predictions by at least one analyst come true, and the satellite merger with XM Satellite Radio (NASDAQ:XMSR) is approved. What was once considered a far-fetched idea now has a lot of wags predicting its imminent outcome.

The merger with XM is certainly behind most CAPS players' thumbs-up ratings, including luebypopoff, who sees worldwide potential in a joint company:

One word: Merger. After XM and SIRI merge, not only will the stock double, but the billions in realized savings will finally make satellite radio profitable. And just think, it's SATELLITE. The world is their market and with satellite technology, SIRI will soon be sending more than radio signals but also TV. The possibilities for this company is limitless.

CAPS newcomer MasonGZhwiti sees an XM-Sirius hookup as the beginning of the last stage of superlative growth before competing technology begins to cut in. The savings from the merger would be a boon until then:

If the merger goes through with XM, which I feel it will, one of the major hurdles to widespread adoption of satellite radio will go by the wayside: choosing a provider. Every new car will come with XMSirius radio installed. It will be cheaper per month than it is now (if the companies are to be believed). Many XM subscribers will fall in love with Howard Stern and tell their friends. The companies combined will have considerable savings on the books.

So the stock is going to be amazing for 2-4 years.

By year 5, however, I do expect the Internet to provide stiff competition to satellite radio. You will have much more access to streaming audio and entertainment via wireless net access, and ultimately Howard Stern will retire.

Speak up
You've heard from the CAPS investors. Now it's your time for a star turn. Tell the CAPS community what you have to say. On Motley Fool CAPS, your opinion counts just as much as the short sellers'. Tell us what you think: Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!