Bank of Ireland

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It may seem surprising that Bank of Ireland ( IRE) is having a great year in 2012. Since the first trading day in January, shares of the $4.5 billion Irish bank have rallied more than 40% -- but that hasn't stopped hedge funds from hating this stock. Funds unloaded almost every share of IRE they owned in the second quarter, getting rid of close to 294 million shares with around $2 billion.

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Of course, it's easy for a stock to rally 40% year-to-date when it's down a whole lot more than that over the whole year. As part of an Irish banking duopoly, Bank of Ireland has all of the negative implications of being a European bank combined with the more acute problems of Ireland. For that reason, headline risk has become critical in this stock, sending shares bashing against the floor every time rumors of bailouts or insolvency come around.

Until the European debt crisis gets resolved, investors should expect pure-plays like IRE to remain volatile. While the name might make for an interesting trade along the way, I'd recommend that most investors take hedge funds' cues and steer clear.

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