Many stocks were beaten down at the end of the year from tax-selling, causing many Nasdaq stocks to be depressed. Now that the tax-selling is over, short-sellers might start to scramble to cover their positions on any good news, which could create some short-squeeze opportunities.

A short squeeze takes place when short-sellers quickly cover their positions on optimistic reports, which can move the price of the stock up sharply. The metric for measuring short-squeeze opportunities is the short ratio, which is the number of days it would take the short-sellers to cover their position based on recent average daily volume.

Stockpickr has reviewed the heavily shorted Nasdaq stocks and came up with a list of the top Nasdaq short-squeeze plays.

One Nasdaq stock with a high short ratio is USANA Health Sciences (USNA), a producer and marketer of nutritional and personal care products through multilevel marketing, also known as network marketing. The stock has a short ratio of 22.7, which means that it would take almost 23 days for the short sellers to cover their positions.

USANA was down about 12.5% for 2008. The company just lost an arbitration involving the termination of a former USANA distributor, and approximately $7 million in compensatory damages for wrongful termination was awarded to the distributor, which is one of the reasons for the stock's depressed price. The stock has a price-to-earnings ratio of 15, which unfortunately is a bit high compared with its competitors, such as Avon (AVP), which has a P/E of 14. USANA has a good P/E- to-growth ratio of 0.9, which is right in line with the multilevel industry average. The company currently doesn't pay a dividend.

The stock is also owned by Renaissance Technologies, a New York-based hedge fund founded by Jim Simons in 1982. Considered to be the top hedge fund, its Medallion Fund has had average annual returns of 38%, after fees, since 1989. Renaissance also owns UST (UST), with a short ratio of 0.6; Amgen (AMGN), with a short ratio of 2.6; and Apple (AAPL), with a short ratio of 0.6.

Anther heavily shorted Nasdaq stock is United Community Banks(UCBI), with a short ratio of 21.6. This Georgia-based multibank holding company just completed its sale of $180 million in preferred stock shares to the U.S. Treasury, as part of the government's bailout. They also just increased their loan loss position. The company recently generated a loss of 26 cents per share, and it stopped paying dividends in June of 2008.

United Community is owned by CalPERS, the California Public Employees Retirement System. CalPERS also owns Exxon Mobil (XOM), with a short ratio of 0.8; General Electric (GE), with a short ratio of 0.9; and Microsoft (MSFT), which also has a 0.9 ratio.

For more ideas, check out the Nasdaq short-squeeze plays portfolio on Stockpickr.

Posted on Jan. 6, 2009