10 Stocks Under Attack

Because 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.

This week, we'll take a look at companies on the New York Stock Exchange with the largest percentage increase in the number of 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 warranted their short interest, but they might also be stricken by short-term troubles. Only Foolish due diligence will tell you for certain; our 125,000-strong CAPS community offers a good place to start.

The short list
The U.S. isn't the only country considering massive infusions of cash into its markets, though it may raise more eyebrows because we supposedly like to limit government intervention in the marketplace. This is probably more of a head-scratcher: Just before Christmas, the U.S. complained to the World Trade Organization that China was propping up exports with subsidies in a wide range of sectors. Um, did the U.S. trade representative forget the Treasury bailing out General Motors (NYSE:GM) and Chrysler, not to mention it giving GMAC a lifeline so it could offer 0% financing on cars so it could better compete with foreign automakers?

Yet China's economy is also in a funk. Economic growth dropped to its lowest level in 15 years last quarter, while exports fell for the first time in seven years in November. The government unveiled a $586 billion stimulus package back in November to help stem the decline. The slide in manufacturing, a sector that represents 43% of China's economy, caused Aluminum Corp. of China to cut its output last month.

CAPS member dwelllewd foresaw such problems back in November, when he pointed out that the prospects for growth were not good, considering the crash in commodity prices.

[Aluminum Corp. of China] mines, refines, and then smelts to bring about their final product, aluminum. All together a very energy intensive ordeal. Unfortunately for [Aluminum Corp.] there is an energy squeeze in China (and will be for awhile, regardless of the price of coal, because the shortage is in infrastructure, not consumables). Which wouldn't be such a problem [if Aluminum Corp.] could pass the cost on, but the price of metals has plummeted, making the entire operation unprofitable. [Aluminum Corp.] is mothballing facillities. The prospects are not good.

For CAPS member RAMFunds, stimulus plans both here and in China should boost Jacobs Engineering.

Jacob's Engineering is a technical service company focused on infrastructure. Both the Chinese and US expect to be implementing some drastic infrastructure updates which leads to success for Jacob's.

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! 

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