BALTIMORE ( Stockpickr) -- Investors have always had a love/hate relationship with so-called "sin stocks" -- companies that operate businesses that some consider morally dubious -- but whichever side of the fence you're on, this week's short-squeeze opportunities could present significant gain potential.
But before we get into those, let's cover the basics. Sin stocks include industries such as tobacco, gambling and alcohol -- even defense contractors fall into this category. Socially conscious investing has become increasingly popular in the last few years, as new mutual funds with specially vetted investments popped up on the scene. These funds, which include the Ave Maria Catholic Values Fund (AVEMX) and the Ariel Fund (ARGFX), only invest in companies that meet certain ethical guidelines.
But sin stocks have their fans as well. With traditionally strong margins, resilience in recessions, and highly marketable products, sin stocks have garnered enough attention to prompt institutional funds of their own, such as the Vice Fund. Today, we'll take a look at five sin stocks that have palpable short-squeeze potential.
A short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors, causing share price to skyrocket. 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.Each week, we create a portfolio of stocks with high short interest ratios and the catalysts to trigger a squeeze. Here's a look at this week's potential plays.