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5 Contrarian Blue-Chip Stocks That Could Pop in 2012

Royal Bank of Canada

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As Canada's largest bank, it may seem surprising that Royal Bank of Canada (RY) is a heavily shorted name. But this $77 billion financial firm has been drawing significant short interest since the recession -- and now, with a short interest ratio of 18.3, the firm actually ranks as the most-shorted of the blue chip names we're watching this week.

That short interest ratio means that it would take nearly a month of buying pressure for shorts to close out their RY positions at current volume levels.

Royal Bank of Canada has managed to churn out good performance in the last few years, boasting a relatively high quality loan book and net margins that are more comparable to a highly profitable regional bank than one of the big-three U.S. banks. Where U.S. majors got caught up in side services, retail banking remained RY's bread-and-butter throughout the recession, a factor that's helped the firm retain a large deposit base and avoid the fates of the big banks here at home.

While it's true that RY is facing some serious headwinds in the form of low rates and a rather treacherous tier 1 capital drop-off that puts the firm in a bad position if deposits flee, customer flight is very unlikely right now. At the same time, the firm's hefty 3.97% dividend yield should continue to attract investors -- especially because it's tied to the commodity-driven Canadian dollar rather than the greenback.

Solid earnings on March 1 could be enough to spur a short squeeze in shares.

Royal Bank of Canada shows up on a lsit of 10 High-Quality Stocks for 2012.

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