BALTIMORE ( Stockpickr) -- With real estate prices starting to heat up again, investors had better start paying attention to real estate investment trusts, better known as REITs.
REITs have become retail investors' go-to instrument for getting exposure to real estate prices over the last few years, and while that exposure wasn't exactly wanted after the real estate bubble burst, it's becoming a whole lot more attractive now that most real estate measures have bottomed and turned higher. Just as important, REITs are one of the few equity investments that still has a low correlation with the
; that means that investors hoping to escape exposure to "the market" can add REITs to their arsenals.
But by and large they're not. In fact, investors still
REITs right now -- and they're betting against them en masse.
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Real estate investment trusts are still among the most heavily shorted classes of investments as I write, a fact that's especially surprising given the income characteristics of REITs in this toxic, low-rate environment. REITs are obligated to pay out most of their earnings in the form of dividends, a legal structure that actually makes many of them better income-generation instruments than real estate instruments (more on that later).
So today, we're focusing on five big REIT names that could be primed for 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.
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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. And my research shows that buying the biggest, most heavily-shorted stocks has historically led to superior returns.
Without further ado, here's a look at
our list of REIT short squeeze opportunities