My first buys all AFTER the hit pieces. I hope my biggest holding somehow is vindicated in terms of most of CCME's earnings being real. That is the only way my portfolio can recover from this fiasco.
Here is how I was fooled: Reading everyone else's opinions, SeekingAlpha positive articles, Global Hunter's revised check of customer revenues, and WCTBills refutations, I really thought the hit pieces were not finding anything because they were all apparently based on fabricated and/or flawed evidence.
But I guess the point there is that Muddy Water's or their clients take the following approach:
1) They look for stocks that oddly have higher profit margins than their peers and stand out with a past 12 month history of huge PPS gains. They avoid 2 dollar stocks (not worth the trouble of shorting) but go for 10 to 20 dollar stocks that have risen a lot in the past 12 months
2) They collect as much speculation on what angle to approach the hit piece using input from sophisticated hedge fund managers - Don't think Carson Block's 5 years experience taught him what to fabricate -- the invisible hedge funds behind him are spoon feeding his thesis and approach to hit pieces.
3) They execute the approach to "investigation research". Whatever doesn't turn up, they just brainstorm with the hedge fund smart guys, and stretch the innuendo, stretch the evidence, or whatever is the best shot at a big impact hit piece.
4) The approach is tantamount to "slinging mud" at something and then waiting to see "what sticks".
They might be right in using (1) Good screening criteria for deciding what company fits the initial profile (#1), and are usually shooting bullets in the right direction with their advice from their clients as to what things may be wrong with the company in deciding in approach (#2). But where they fall short may be in whether they produce truthful or falsified representations in executing research reports (#3). Basically, it is hard to find proof unless you are an authorized forensic auditor, and therefore Muddy Waters almost never gets close enough to a company to prove anything. However, they stretch the evidence and fabricate evidence and take verbal opinions from people they talk to and use that to "throw mud" (#4). And even if much of the mud doesn't stick, if the probability of something being amiss in the areas that they focused on (such as bus count with installed LCDs) is pretty high, then all the collective hit pieces pressures the auditor to go through a very deep and comprehensive verification process that only an auditor can get close enough to achieve.
End of story. Sort of like the end justifies the means. I guess they are weeding out fraud, but the "throw mud until it sticks" approach is what makes retail investors think they are ALWAYS full of crap. In actuality the hedge fund clients are often quite smart in that they "smell something" and just don't have the authorization to look at the inside details to really find the truth, but sometimes the truth surfaces with enough mud slinging, enough lawsuits, and enough pressure on auditors.
Interesting.
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