Stockpickr) -- When you're looking for stocks with explosive upside potential, your first stop should be Wall Street's "hate list."
Of course, I'm talking about digging through the most heavily shorted names on the market. Stocks with massive short interest aren't just good
contrarian bets -- they're also prime candidates for a short squeeze, the buying frenzy that erupts when short sellers are forced to buy back shares of a stock at a loss just to exit their trades. That increased demand for shares can cause shares of a "hate list" stock to skyrocket, fueling more buying from other short sellers.
Typically, short sellers tend to target smaller stocks that have obvious mispricing -- but that's not always the case. Sometimes, large-cap names get heavy shorting pressure as well, creating an even more interesting opportunity for investors with a contrarian bent.
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After all, large-caps tend to have more mature financials, better access to funding, and more analyst eyes on them. As a result, they can snap back much more quickly than smaller names -- and spur on a short squeeze even easier. One of the best indicators of just how high a short-squeezed stock could go is the short interest ratio, which estimates the number of days it would take for short-sellers to cover their positions. The higher the short ratio, the higher the potential profits when the shorts get squeezed.
Naturally, these plays aren't without their blemishes -- there's a reason that these stocks are being heavily shorted. But for investors looking for exposure to a speculative play with a beefier risk/reward tradeoff, these could be powerful upside plays for the coming year.
Without further ado, here's a look at our list of
large-cap short-squeeze opportunities
. And for another set of short-squeeze plays, check out "
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