Skull Candy (SKUL) is currently at the top of the short interest list. They make headphones and other audio equipment. A nice little manufacturer, the only problem with this company is it's valuation.
It sells at 1.32 times sales. Not profit, mind you, but sales. It has a nice gross margin of 50%, but in a competitive industry, that is not likely to continue, as competition will drive down prices, reducing margins.
The risk with any stock this heavily shorted is the danger of a short squeeze. There are so many shorts that if there is any positive news, the weak shorts will cover and drive the price up suddenly. You really need to wait for a pop in the price (the short squeeze) to short here. The stock is way overpriced and if the company continues to grow, it will take years to grow into this evaluation.
The more likely scenario is that the stock price will drop to match the current valuation. Enjoy the ride.
Disclosure: I don't own this stock, and never would. I currently have no position.