10 Highly Shorted, Rallying Stocks With Strong Sources Of Profitability

Looking for potential short squeeze candidates? Here are some ideas to get started on your search.

We ran a screen on stocks that are highly shorted, with float shorts greater than 15%. We screened these stocks for those currently rallying above their 20-day, 50-day, and 200-day moving averages, indicating market bullishness.

Finally we ran DuPont analysis on the names to find those with strong sources of profitability.

DuPont analyzes return on equity (ROE, or net income/equity) profitability by breaking ROE up into three components:
ROE
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

It therefore focuses on companies with the following positive characteristics: Increasing ROE along with,

• Decreasing leverage, i.e. decreasing Asset/Equity ratio
• Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Companies with all of these characteristics are experiencing increasing profits due to operations and not to increased use of financial leverage.

?Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.?

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We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks are likely to see a short squeeze, boosting prices higher?

Use this list as a starting point for your own analysis.

List sorted by

1. athenahealth, Inc. (ATHN): Provides ongoing billing, clinical-related, and other related services to medical group practices primarily in the United States. Float short at 25.44%. The stock is currently rallying 7.17% above its 20-day moving average, 8.45% above its 50-day MA, and 13.10% above its 200-day MA. MRQ net profit margin at 6.31% vs. 6.07% y/y. MRQ sales/assets at 0.264 vs. 0.261 y/y. MRQ assets/equity at 1.439 vs. 1.573 y/y.

2. Bio-Reference Laboratories Inc. (BRLI): Provides clinical laboratory testing services for the detection, diagnosis, evaluation, monitoring, and treatment of diseases primarily in the greater New York metropolitan area. Float short at 18.27%. The stock is currently rallying 9.85% above its 20-day moving average, 26.66% above its 50-day MA, and 2.36% above its 200-day MA. MRQ net profit margin at 6.92% vs. 6.78% y/y. MRQ sales/assets at 0.534 vs. 0.519 y/y. MRQ assets/equity at 1.493 vs. 1.602 y/y.

3. Cal-Maine Foods, Inc. (CALM): Engages in the production, grading, packaging, marketing, and distribution of shell eggs primarily in the southeastern, southwestern, mid-western, and mid-Atlantic regions of the United States. Float short at 17.15%. The stock is currently rallying 4.36% above its 20-day moving average, 10.15% above its 50-day MA, and 20.78% above its 200-day MA. MRQ net profit margin at 8.01% vs. 6.48% y/y. MRQ sales/assets at 0.422 vs. 0.368 y/y. MRQ assets/equity at 1.576 vs. 1.625 y/y.

4. Coinstar Inc. (CSTR): Provides automated retail solutions primarily in the United States, Canada, Puerto Rico, the United Kingdom, and Ireland. Float short at 40.88%. The stock is currently rallying 9.76% above its 20-day moving average, 12.90% above its 50-day MA, and 5.48% above its 200-day MA. MRQ net profit margin at 7.97% vs. 5.13% y/y. MRQ sales/assets at 0.373 vs. 0.312 y/y. MRQ assets/equity at 2.542 vs. 2.706 y/y.

5. DuPont Fabros Technology, Inc. (DFT): Engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. Float short at 17.24%. The stock is currently rallying 4.97% above its 20-day moving average, 8.29% above its 50-day MA, and 10.45% above its 200-day MA. MRQ net profit margin at 26.46% vs. 17.93% y/y. MRQ sales/assets at 0.03 vs. 0.025 y/y. MRQ assets/equity at 1.956 vs. 2.955 y/y.

6. Kronos Worldwide Inc. (KRO): Engages in the production and marketing of titanium dioxide pigments in North America and Europe. Float short at 20.53%. The stock is currently rallying 9.64% above its 20-day moving average, 20.99% above its 50-day MA, and 2.76% above its 200-day MA. MRQ net profit margin at 15.68% vs. 8.52% y/y. MRQ sales/assets at 0.308 vs. 0.283 y/y. MRQ assets/equity at 1.999 vs. 3.263 y/y.

7. Lumber Liquidators Holdings, Inc. (LL): Operates as a specialty retailer of hardwood flooring in the United States. Float short at 18.24%. The stock is currently rallying 10.20% above its 20-day moving average, 22.09% above its 50-day MA, and 15.60% above its 200-day MA. MRQ net profit margin at 3.92% vs. 2.91% y/y. MRQ sales/assets at 0.651 vs. 0.628 y/y. MRQ assets/equity at 1.293 vs. 1.352 y/y.

8. Life Time Fitness Inc. (LTM): Designs, builds, and operates sports and athletic, professional fitness, and family recreation and spa centers in the United States. Float short at 20.23%. The stock is currently rallying 7.30% above its 20-day moving average, 14.01% above its 50-day MA, and 25.34% above its 200-day MA. MRQ net profit margin at 10.17% vs. 9.81% y/y. MRQ sales/assets at 0.15 vs. 0.14 y/y. MRQ assets/equity at 1.914 vs. 2.094 y/y.

9. Sonic Automotive Inc. (SAH): Operates as an automotive retailer in the United States. Float short at 24.26%. The stock is currently rallying 3.74% above its 20-day moving average, 6.87% above its 50-day MA, and 15.97% above its 200-day MA. MRQ net profit margin at 0.97% vs. 0.73% y/y. MRQ sales/assets at 0.89 vs. 0.854 y/y. MRQ assets/equity at 4.429 vs. 5.231 y/y.

10. Weight Watchers International, Inc. (WTW): Provides weight management services worldwide. Float short at 23.42%. The stock is currently rallying 8.75% above its 20-day moving average, 20.23% above its 50-day MA, and 11.30% above its 200-day MA. MRQ net profit margin at 18.82% vs. 13.44% y/y. MRQ sales/assets at 0.394 vs. 0.3 y/y. MRQ assets/equity at -2.309 vs. -1.548 y/y.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.