Blinded By the Light: Why It's a Mistake to Short Syntax-Brillian

In the awakening days of High Definition television, an emerging market that is expected to grow by 300% this year alone, an incredible growing number of shorts have taken bets against uprising star Syntax-Brillian (BRLC). Were the short sellers dazzled by Syntax-Brillian’s Consumer Report best rated crystal clear picture? Or were they irresistibly and dangerously attracted as moths are to a flame?

The short interest grew by a staggering 48% as reported on Jan 09, 2007. This ballooning short count grew to an unbelievable total of 12.61 million shares. In a small float of 28 million shares, this represents 42.60% of the float being shorted. And one might certainly wonder why so many are betting against the brilliance of Syntax-Brillian.

Well, let’s take a look at the shorts cheerleading squad to start. Stocklemon took a short position in this stock. That’s right folks, the very same people that shorted (NASDAQ:NWS)! Or look at their original short position of IMergent (IIG) in the low single digit range, that today trades above 20.00. Gullible shorts have followed this short cheerleader squad to financial ruin on more then a dozen occasions.

Ignore the security related fraud lawsuits filed against the shorts cheerleading squad, and their claim that Syntax-Brillian would never make 190 million in a single quarter just 45 days ago; then maliciously erase that entry from their Blog after Syntax-Brillian posted record revenue of $242 Million. Let’s take a real look at what will cause the shorts to tremble in fear

The Federal Communications Commission established a deadline that as of July 1, 2006, all televisions sold in the USA that have screens 25-inches diagonal or larger must include a digital tuner. In one year from this deadline, this expands to include all televisions 13-inches or larger, as well as any “TV Interface Device” — such as VCRs and DVRs that receive broadcast signals — must also include digital tuners. High Definition televisions are in their “infancy” stage today. As manufactures ramp up production to meet the ever growing demand, unit cost production will fall, making the sets not only more affordable but at the same time more profitable for volume players such Syntax-Brillian.

Will falling prices hurt Syntax-Brillian?

The very recent addition of Target (NYSE:TGT) stores and Kmart (NASDAQ:SHLD) stores means a total of 3,000 additional stores will be stocking their shelves with Olevia. And Syntax-Brillian plants will hardly get a rest following the super bowl buying frenzy The shorts cheerleading squad last quarter screamed “They are selling ten dollar bills for 9.00.” Well the second quarter facts are in folks. And it is now proven that those 10 dollar bills were sold for $11.57 each. And in the Conference call, future margins stated mean that those same 10 dollar bills should be selling for $11.90 each in the next few quarters.

We find ourselves not only in a day and age that the federal government is MANDATING digital tuners (High definition), but in an age that consumers themselves are demanding larger screen high definition televisions. It would appear to me that the near sighted shorts will be left in the dust along with the other relics of this decade, the analog TV sets. LCD’s are “tomorrow’s” product “Today” and Syntax-Brillian not only has it, its growth, it’s management team, it’s impressive low fixed overhead, lean and efficient supply chain, but Consumer Report top ratings amply indicates they do it better then anyone out there!

As Target and Kmart shelves start vacating the lesser and higher priced products from makers such as Sony (NYSE:SNE), Panasonic, Sharp (OTCPK:SHCAY), Samsung and JVC to make room for the “Real” star of the show OLEVIA . You can bet your bottom dollar the absurd number of 12 million shorts will tremble in fear, and even their short sighted view of the company will come in focus, either under the ten dollar range or in true High Definition when the stock trades in the teens.

At the moment you can bet with the crowd that shorted or you could choose to follow the real money, like the M100’s and the Institutions and funds that are not only adding to their positions but also the new Institutions and funds that are joining the buyers in a growth stock that is trading below a forward EPS of 10.

My money is firmly with the Bulls. Bears are advised to don sun glasses, as the Syntax-Brilliance has blinded 12.61 million shares already.

BRLC 1-yr chart

Disclosure: Author is long BRLC.