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.

This week, let's look at companies on the American Stock Exchange with the largest proportions of shares sold short among their float. Combining that with the collective intelligence of Motley Fool CAPS, we'll see which of these firms Fools believe have the power to make short work of short sellers.


Shares Short July  31

Shares Short July 15

% Change

% of Float*

CAPS Rating (out of 5)

Vantage Drilling






Interoil (AMEX:IOC)






Orleans Homebuilders






Cheniere Energy (AMEX:LNG)






Apex Silver Mines (AMEX:SIL)






Metalico (AMEX:MEA)






Ener1 (AMEX:HEV)












American Apparel (AMEX:APP)






TriValley (AMEX:TIV)






Sources: Share counts in millions.
*Float defined as shares outstanding, minus shares controlled by insiders, restricted stock, and shares held by 5% owners.

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, and for that, our 115,000-strong CAPS community offers a good place to start.

We do note, however, that Vantage Drilling has a ridiculously large percentage of its shares short as a percentage of its float. It also shows up on the SEC's Regulation SHO list, along with four other companies in the above list (Interoil, Cheniere, Metalico, and TriValley). Is this a sign of naked shorting?

The short list
Enjoying the profits associated with higher fuel prices, Interoil now aims to take advantage of additional opportunities in Papua New Guinea, where it already has an interest. Yet CAPS member Zeti thinks Interoil has developed too much debt to work up much enthusiasm about its prospects:

I have trouble sharing some of the shareholders enthusiasm with this company. Same old story, same old song. Too much debt and problems, no basis for future if the past is anything to go by.

Cheniere Energy seems to have similar problems. It had to borrow $250 million to stay afloat, though at least one analyst says that loan should solve its short-term financing needs for at least the next three years. That's not enough for CAPS member cashsage, who thinks bankruptcy is still a possibility:

[Cheniere] is one of the energy companies with the most illiquid balance sheet. It is also loss making. It may go bankrupt.

Scrap-metal recycler Metalico, on the other hand, has seen business booming as metal prices skyrocket along with other commodities. While its operating results were as solid as its scrap, Metalico's GAAP results were affected by a non-cash charge. CAPS member ILBelaine believes the stock's sell-off is a temporary situation: "Company reported record earnings last week, but has been beaten with the ugly stick along with the sell-off in commodities. Recycling is not only responsible, it is rapid growing and profitable."

timattox thinks Apex Silver Mines got caught by bad hedges that could effect its future viability, but believes that getting past that will allow the company to prosper in the years ahead:

Silver, Zinc, Lead miner that has some bad hedges that may force them to sell some of their mining rights, or go bankrupt! Not sure if this is fully priced in already, but sure looks like it from the chart. If they can get past this hurdle, their mine is actually on the verge of being profitable. So, I can't tell if this is going up, or going down short term. So watch and see in CAPS. My gut is that it is likely to going down a little more for a few weeks/months, and then back up dramatically next year (2009).

Speak up
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!

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. There's no short cut around the Motley Fool's disclosure policy.