It prompted me to recall two similar situations I injected myself into back in my Seeking Alpha days. Both provide valuable lessons on not filtering out red flags, particularly as you're entering emotional territory on the volatile stock of the day.
I'll review the aforementioned instances in a minute, but first ...
I have no position on or in Plug Power (PLUG); however, Weinstein's article resonated with me, primarily because it raised red flags investors need to consider with respect to every stock they buy or sell short. And, if you're dealing in smaller names, thinly-traded equities, penny stocks or battleground stocks, you need to not only consider red flags, but seek them out.
You have to scrutinize your original conviction -- what you think you know -- to the point where you aggressively take the other side. For some of us, it's not possible to effectively check ourselves. We cannot remove emotion -- and the damaging investor psychology it can create -- from the equation, so we have no business wading in risky territory.
I know this because back in my trading and investing days (TheStreet's editorial policy prohibits me, a full-time employee, from holding positions in individual stocks other than TheStreet (TST)), I got burned one too many times chasing any and all of the above. I learned -- the hard way -- to just stay away from the battleground and, if a group like Citron was involved, ignore the situation completely.
Of course, the principal at Citron, Andrew Left, wasn't happy with Weinstein's reporting. While I have no opinion on PLUG or the veracity of Citron's research, I do believe we need more people like Weinstein calling out people like Left, holding them accountable and making them answer the difficult questions.
As Robert wrote:
You may not have been aware of that information when Left appeared on Comcast's (CMCSA) CNBC on Tuesday to talk about Plug Power. The network apparently decided it was reasonable to allow Left to state his case without another guest challenging his claims. the result was a turkey shoot.
It's not unusual for the market to quickly brush off a negative Citron Research report and continue higher. I know this from firsthand experience. After shorting falling stocks in the immediate aftermath of negative reports and watching my short reverse back higher too many times, I've learned to remain skeptical about Left's research.
So, of course, Left wasn't happy. Weinstein published information -- that's available to any investor if they know where and take the time to look -- that lays out facts surrounding Left's history and Citron's track record. This data couldn't be more material to the situation surrounding PLUG, a situation triggered by Citron itself.
Left's angry response, which, as I understand it, came with the typical attendant threats doesn't surprise me. I've been there before. And, while the situations aren't necessarily analogous, they speak to one another in real ways. Additionally, they provide the lesson that we should not only scrutinize third-party research groups that take short (and, as Weinstein noted, sometimes long) positions, but we should scrutinize companies themselves.