CNBC’s Jim Cramer warned investors on Tuesday to avoid buying losing stocks in a bet against short sellers.
The market went in favor of short sellers on Tuesday after major indexes fell. The market tumbled earlier in the day as it digested disappointing corporate financial reports and braced for key inflation figures later this week.
“In a market that gives you plenty of opportunities to lose money, I can’t endorse buying these losing stocks in hopes of creating a short squeeze. Sooner or later, you end up with a day like today where that tactic just blows up in your face,” the “Mad Money” host said.
Here are the stocks Cramer is referring to:
- Bed bath and beyond
- Beyond meat
More and more investors seem to be trying their luck with short selling. The GS Most Short Index, which measures stocks investors are selling or betting against, is up more than 18% in the past five days. It is currently at its highest level since last January, when the meme stock craze was at its peak.
Cramer warned investors that this action makes money-losing stocks misleadingly attractive as long-term plays.
“When good things happen to bad stocks, I get nervous. We’ve seen a lot of bad stocks rally just because too many hedge funds shorted them all at once and those sales ended up being squeezed “, did he declare.