With Stocks Massively Overvalued, Goldman Suggests You Short These Stocks

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Back in September 2013, we first showed that perhaps the only solid alpha-generating strategy was going long the most shorted stocks in advance of a short squeeze. Since then, the cat has left the bag, and not only have investors scrambled to jump on the long side of the most hated names but there now is, as we reported a week ago, a short squeeze ETF (Ticker SQZZ).

The bigger problem, however, with observing this particular strategy and putting into the public domain, is that once everyone jumped on board the strat’s profitability promptly evaporated, as can be seen in the following Goldman charts laying out the performance of the most shorted stocks relative to the Russell 3000.

Why have forced short squeezes lost their oomph? Goldman explains:

Shorts have weighed on investor performance during the current bull market. The average equity long/short hedge fund returned 2% in…

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