Looking ahead to next week and the earnings reports awaiting us, I noticed that one of the week's first reporters will be Motley Fool Hidden Gems watch list stock J2Global Communications (NASDAQ:JCOM). The company, whose stock in trade is enabling the sending and receipt of faxes by computer, has racked up an impressive record of outperforming Wall Street's estimates and making the huge number of investors that have shorted its stock look rather foolish. With a small "f."

Case in point No. 1: Nearly one year ago, Jefferies Group (NYSE:JEF), one of seven institutions that monitors the stock, placed a "buy" rating on J2 and attached a 12-month price target of $32 to the stock. Jefferies called the "buy" sign right -- but greatly underestimated J2's ability to perform as an investment. As we head into the weekend and Monday's earnings report, J2 already sports a price nearly $5 above Jefferies' prediction.

Case in point No. 2: According to Yahoo! Finance, J2 has a whopping 19% of its shares sold short. Now ordinarily, "shorts" are pretty savvy investors. They have to be. With a maximum 100% return on any investment they make (whatever a stock's price, the most it can lose is everything), and unlimited risk (because a solid company's stock can theoretically rise to infinity), you need to be smart to be a successful short. "Long" investors, on the other hand, can just buy an S&P index fund and trust to the American capitalist system to grow their investment over time.

Now don't get me wrong -- I'm not anti-short. Shorts serve a useful purpose because, with so much risk, they work very hard to sniff out trouble at the companies they disdain. And that hard work can benefit investors, who can interpret a large short position as a warning that a company is in trouble.

But in this case, I simply don't get the logic behind the large short position on J2. For the past four quarters, every quarter, J2 has beat consensus analyst estimates for its GAAP earnings growth. It's also grown its free cash flow by, at last report, more than 50% over its fiscal 2003 numbers. At the beginning of the year, the company had a war chest overflowing with more than $66 million in cash and equivalents, and another $28 million in long-term investments -- numbers that have likely risen since then in the absence of any cash burn and, on the contrary, probable increased cash generation.

Monday may prove me wrong, but I honestly think it's going to be another bad day for the J2 un-faithful.

It's not just J2 that has done well. As a whole, Motley Fool Hidden Gems recommendations are trouncing the market, and have done so since the newsletter's inception. As of this writing, we're up 26% since we started, against a 6% gain for the S&P. Want to see what we're looking for in companies? No need to send us a fax -- just click here and start your free trial subscription today.

Fool contributor Rich Smith has no position in any of the companies mention in this article.