According to Jim Cramer, there are still some technology stocks worth investing in, including Hewlett-Packard (HPQ), which he thinks is not too late to buy.

Since technology companies have taken such a beating in the market, it's likely that there are also some short-squeeze opportunities to take advantage of.

The short-squeeze play is a technique that stock traders utilize to generate huge profits in a short period of time. After several days of market drops, heavily shorted stocks could surge on any positive catalyst, especially as short-sellers scramble to cover their bearish positions.

Short positions of stocks are measured by the short-squeeze ratio, which represents the number of days it would take for the short-sellers to cover their positions based on the recent daily volume of the stock.

Stockpickr has reviewed all the technology stocks and developed a list of the Top Technology Short-Squeeze Plays.

A tech stock with one of the highest short ratios is Open Text (OTEX), a provider of enterprise content management solutions, which has a short ratio of 20.4. This means that it would take the short-sellers more than 20 days to cover their positions, based on recent volume. The company just reported its earnings and stated that it beat its earnings and revenue estimates for the first quarter. The stock has a P/E ratio of 23, which is high compared with other major tech stocks and the industry average; however, it has a favorable PEG ratio of 0.64, better than the industry average of 0.74.

Open Text, an Ontario-based company, shows up in a Stockpickr portfolio called Canadian Technology Companies, which lists tech companies that are based in Canada, have market caps of more than $300 million and trade either on the New York Stock Exchange or the Nasdaq. Other stocks in the portfolio include CAE (CGT), with a short ratio of 6.9; CGI Group (GIB), with a short ratio of 1.3; and Research In Motion (RIMM), which just came out with the Storm, BlackBerry's first touch-screen phone. RIM has a 0.5 short ratio.

Another heavily shorted tech stock is Cree (CREE), a maker of semiconductor materials, which has a short ratio of 15.7. In September, the company was upgraded by Oppenheimer to outperform from perform with a target price of $31. Although the company's latest quarterly earnings were down, they exceeded analysts' expectations, and its revenue grew 24%. The stock has a P/E of 48, which is a bit high, and a PEG of 1.7.


Cree is owned by the Waddell & Reed Adv Science & Technology Fund, which has a Morningstar rating of five stars and is managed by Zachary Shafran. The fund has had an average annual return of 5.4% over the last five years. It also owns Noble Energy (NBL), with a short ratio of 0.6; Cerner (CERN), with a 4.5 short ratio; and Archer Daniels Midland (ADM) which has a short ratio of 2.2 and was discussed recently by Dan Fitzpatrick on TheStreet.com TV.

For more ideas, check out the Top Technology Short-Squeeze Plays portfolio at Stockpickr.com.

Posted on Nov. 24, 2008