As we noted at the time, Goldman's prime desk had aggressively covered the most crowded short positions, and as we showed in the chart below, stocks with the highest short interest relative to float strongly outperformed their peers in most sectors. The outperformance was particularly dramatic in the Energy sector, which experienced a large increase in hedge fund net positioning during 1Q and has been the best-performing equity sector thus far in 2Q.

And the punchline: since the start of 2Q, large-cap Energy stocks have returned 15%, small-cap Energy stocks have returned 24%, and the most heavily shorted Energy stocks have returned 30%. In short: the biggest outperformers this quarter were those "most hated" names that saw the biggest short squeeze, a strategy that has been a guaranteed generator of alpha since 2012 when we first recommended going long a basket of the most shorted names.