BALTIMORE ( Stockpickr) -- It may seem surprising, but investors hate pharmaceutical stocks right now. Or maybe it's more surprising that harnessing that hate could be a very good thing for buyers this summer.
By and large, investors have been hating on pharmaceutical stocks for the last few years. And they've got their reasons: health care reform drama on Capitol Hill, the treacherous cliff of patent expirations, and a market that's already pretty anxiety-ridden haven't helped. That's a big part of the reason why drugmakers boast such big dividend yields right now; they're being discounted for perceived risk.
But the bets are getting out of control this summer -- that's why it makes sense to take a contrarian look at the five pharma stocks that everyone hates right now.
With short sellers piling into these five names this summer, shorting is reaching extremes in these big pharmaceutical names, a situation that could lead to a short squeeze.In case you're not familiar with the term, 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. Related: 5 Stocks Under $10 Set to Soar Naturally, these plays aren't without their blemishes -- there's a reason (economic or otherwise) 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 pharmaceutical short squeeze opportunities.
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