The 5 Most Shorted Stocks in the S&P 500

April 29, 2013 at 05:00 AM EDT

May's right around the corner and bears are piling on bets against the most shorted stocks - and the overall market - in preparation for the expected annual sell-off. During the first two weeks of April, almost 60% of stocks in the Standard & Poor's 500 Index saw an increase in short interest, and the Nasdaq had an overall increase in short positions as well. Right now, the most shorted stocks include a struggling retailer, a for-profit college and an alternative energy company - and one stock that's up a whopping 131% in 2013. But don't be misled into going against the grain. These stocks are not "buys." Rather, investors should steer clear of these risky stocks. To continue reading, please click here…

May's right around the corner and bears are piling on bets against the most shorted stocks - and the overall market - in preparation for the expected annual sell-off.

During the first two weeks of April, almost 60% of stocks in the Standard & Poor's 500 Index saw an increase in short interest, and the Nasdaq had an overall increase in short positions as well.

Right now, the most shorted stocks include a struggling retailer, a for-profit college and an alternative energy company - and one stock that's up a whopping 131% in 2013.

But don't be misled into going against the grain. These stocks are not "buys."

Rather, investors should steer clear of these risky stocks.

5 Most Shorted Stocks

This list of most shorted stocks in the S&P 500 is made up of companies with the highest percentage of outstanding shares sold short.

Here they are:

J.C. Penney Co. Inc. (NYSE: JCP): Is it any surprise J.C. Penney tops the list of most shorted stocks, with a short interest of 47.4%? The battered retailer has lost 61% from its 2012 high, and not even the news that George Soros has taken a stake in the company will help it survive much longer. Penney is not the only retailer struggling. It joins these companies among big-box retailers that could soon become extinct.

GameStop Corp: (NYSE: GME): After a 54% increase in its stock over the past year, investors are increasingly skeptical that the video game retailer can keep up the success. Even though the company gave a strong outlook for 2013 when it reported 2012 earnings last month, the fact is GameStop lost almost $270 million last year. That's certainly not inspiring, and its short interest now sits at 38.1%.

First Solar Inc. (Nasdaq: FSLR): At the end of 2012, First Solar stock was down 82% from its 2011 peak near $170. But on April 9, the company said it expects earnings and revenue for the next three years to be well above analysts' estimates, and its stock surged 45%. After the initial short squeeze, bears scrambled to once again short the stock, sending the short interest to where it currently stands at 30.4%, up from 20% just a few weeks earlier. Watch its first-quarter earnings Tuesday, April 29, to see if the bears are finally right, or in for another squeeze.

Apollo Group Inc. (Nasdaq: APOL): One of the worst stocks of 2012, Apollo continues to get no love from Wall Street. After falling 62% in 2012, the University of Phoenix operator is down another 14% this year. Expectations for Apollo are still bleak, as its stock has a short interest of 20% and the company plans to close more than 115 of its smaller campuses in the next few years.

Netflix Inc. (Nasdaq: NFLX): Even though Netflix is the 15th most shorted stock on the S&P 500, it might be the best one to short, especially after its latest earnings boost. When Netflix reported first-quarter earnings April 22, its stock surged 25%, making its P/E 741. Further, NFLX is up 306% from its 52-week low, hit just last October. This has been a volatile stock the past few years. It's gone from the $50s to almost $300 then back to the $50s, before making its latest run to $215, which is why investors should avoid Netflix - or short it, if they're bold enough.