Most Shorted Stocks Are Outperforming US Equities
Interesting chart for Friday: being long US equity has delivered steady gains over the last 6 years; however, being long the most heavily shorted basket of 250 stocks (not an ETF, yet) would have outperformed the market by 3x.
The most likely reason is short squeezes that are amplified by a social media driven retail buying frenzy. It could also be mean reversal, contrarian investing, or risk-on behavior, but with lower likelihood.
It would be interesting to know how hedge funds are adapting their trading strategies to retail investors’ behavior during these squeezes.
And as always with the great short opportunities – the markets can remain irrational longer than you can remain solvent.
Source: FT, S3 Partners
#Investing #HedgeFunds #StockMarket #Markets
S3 basket: “Most shorted” basket is top 250 US equities by short % float with notional short interest above USD 10 million and market cap above USD 300 million.
Leave a Reply