4 Stocks With High Short Interest That Could Rise

NEW YORK (TheStreet) -- Shares of companies that investors are betting will fall, such as coupon seller Groupon(GRPN) and online travel-deals company Travelzoo(TZOO) , may get a pop if they exceed analysts' expectations for earnings in the first quarter.

A so-called short squeeze, in which investors betting on stock-price declines buy back the shares if they rise, is a common occurrence with companies with a high short-to-cover ratio. Skullcandy(SKUL) , a maker of headphones and other audio accessories, has a short-to-cover ratio of 28.1. That ratio indicates how many days, based on average daily volume, it would take all of the shorts to cover their shares and buy them back.

Company earnings have slowed, and analysts expect an increase of only 0.9% for the benchmark S&P 500, according to Sam Stovall, chief equity strategist at S&P Capital IQ. That heightens the probability of short squeezes, as investors grow more pessimistic on equities, in particular those they think will fare worse than their peers.

There are several scenarios for a short squeeze, including seasonality, but with earnings season upon us, strong earnings and solid guidance could lead these four companies higher.

Groupon

Groupon has been one of the most controversial names since going public in November 2011.

As of the end of March, 23.3 million shares were held short. The stock has a 11.5 short-to-cover ratio, according to Nasdaq.com.