Don’t bet against short sellers in this market, Jim Cramer warns

CNBC’s Jim Cramer on Tuesday warned investors to avoid buying money-losing stocks in a bet against short sellers.

The market went in favor of short-sellers on Tuesday after the major indices fell. The market teetered earlier in the day as it digested disappointing financial reports from companies and prepared for key inflation numbers later this week.

“In a market that’s presenting you with ample opportunities to lose money, I can’t endorse buying these money-losing stocks in the hope of engineering 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 referred to:

  1. Bed Bath & Beyond
  2. Upstart
  3. AMC
  4. Beyond Meat
  5. Wayfair
  6. GameStop

More investors appear to be trying their luck with short-selling. The GS Most Short Index, which measures stocks that investors are shorting, or betting against, rose more than 18% over the last five days. It’s currently at its highest level since last January, when the meme stock craze was at its peak.

Cramer warned investors that this action is making money-losing stocks look deceptively attractive as long-term plays.

“When good things happen to bad stocks, I get nervous. We’ve seen a lot of low quality stocks rallying purely because too many hedge funds shorted them at the same time and those shorts ended up getting squeezed,” he said.

(With inputs from CNBC)