The Citron Year in Review 2008

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It is now obvious that 2008 has been a watershed year for equity markets.  Citron does not celebrate the devastation of capital that many investors, both large and small, active and passive, suffered this year as the speculative debt bubble burst and equities deflated. 

It’s just not our style to take a victory lap; however, we do seek to define our place in the world of newsletters.  Recently Marketwatch.com listed the top 10 newsletters from 2008, and we noticed our absence. 

http://www.marketwatch.com/news/story/2008s-star-newsletter-profits-stars/story.aspx?guid=%7BFFA002E0%2DCA5E%2D4E4F%2D917D%2D1CC76936F341%7D

What makes this noteworthy is that we have never made that list, yet Citron would offer its track record head-to-head against any newsletter in this country, over the last year or over a 7 year span.  We understand that our words might be a bit more colorful than the next guy, but that should never distract readers from the credible and verifiable information that Citron provides to the investment public….at no charge.

For the last seven years Citron’s motto has been, “Cautious Investing to All”. 

2008 provided an overwhelming lesson in why caution is necessary when it comes to deploying your own capital.  Whether you are investing with T Boone Pickens, Bernard Madoff, or with any analyst that posts a “strong buy”, greed should be counterbalanced with an equivalent measure fear, and buttressed with a healthy dose of skepticism.

We’ve assembled a basic summary of all the stocks we’ve reported in 2008. It has never been Citron’s strategy to try to outguess the markets, or engage in market-timed trading.  But even against a baseline of an expected 30% or 40% equity loss, Citron’s skepticism in regard to the specific stocks it analyzed was borne out. 

Despite bullish opinions and buy ratings by numerous analysts, Citron’s two most often reported stocks – Arthrocare (NASDAQ:ARTC) and Emcore (NASDAQ:EMKR) have both fallen by 90%.  8 of the 11 stocks Citron covered performed worse than even the adverse market of 2008. Only 1 of the 11 is trading moderately higher than when we first reported it (HEV), and we do not believe that will be for much longer.

It remains Citron’s firm conviction and investment philosophy that companies engaging in misleading financial reporting, or operating business models that defraud consumers, will underperform the market over time, in both bull and bear markets.  We appreciate our readers and we hope that they will regard Wall St. in a different mindset 2009 – a mindset that demands accountability from analysts and listens to the warnings of contrarians.

We believe the truth is out there, and it is valuable.

Please look at the data and draw your own conclusions.  For 2009, we would hope that CNBC would adopt our motto “Cautious Investing to All”

Citron 2008 — Summary of Stock Research and Outcomes

2008 Reported companies

Number of times reported

Closing Price on
12/30/08

Price when reported — High

Price when reported — Low

Pct Change from High

Pct Change from Low

Days since first reported

ARTC

14

4.81

52.14

44.15

-90.77%

-89.11%

375

EMKR

6

0.78

8.20

6.14

-90.49%

-87.30%

279

AMSC

3

15.56

45.78

29.38

-66.01%

-47.04%

230

BWTR

1

0.44

6.22

 

-92.93%

266

VLNC

1

1.76

4.46

 

-60.54%

264

PDO

1

4.00

32.80

 

-87.80%

188

HEV

2

7.22

6.70

5.06

7.76%

42.69%

166

AMED

1

42.21

66.13

 

-36.17%

139

FOUR

1

1.70

9.60

 

-82.29%

137

RBCAA

1

25.90

25.21

 

2.74%

67

LTM

2

12.37

13.25

11.2

-6.64%

10.45%

39