BALTIMORE ( 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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