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Jim Cramer explains his quick turnaround on Linn Energy (LINE -14.1%) after yesterday's rout: "I...

Jim Cramer explains his quick turnaround on Linn Energy (LINE -14.1%) after yesterday's rout: "I did like the company, but they're being examined... you can't have even examinations of accounting irregularities... accounting irregularities equals sell." As recently as June 19, Cramer had passionately defended the stock. LNCO -11%.
Comments (74)
  • Wow, bummer. I am really surprised how fast Cramer spins it (NOT). I personally think he changes his opinion extremley frequently and that his track record is pretty bad. He may be right in this case but what he is doing is really not helping people. His inconsistencies confuse in particular the "mom and pop" investors watching his show. His show is amusing on occasion, in particular if he starts raging and throwing stuff. For a change, throw him (out).
    3 Jul 2013, 11:57 AM Reply Like
  • Am afraid you are correct...as much as I have tried to benefit from his recommendations they have been more bust than gain...
    3 Jul 2013, 12:56 PM Reply Like
  • Cramer is a smart guy, but he has a few rules. One is whenever there is any doubt about a Company's accounting, it is a Sell. He has said that numerous times, so it is just a rule he has made based on his experience. My rule is to do the opposite of what Wall Street does, and that has worked very well for me.
    Cramer was responsible for other people's money, and he is a lawyer, so he knew that he was legally liable for ignoring accounting problems. Now, I don't believe he is managing others money, but he follows the same rules.
    One thing he, or anyone else, won't tell us is what the worst case scenario is. I think the risk was a 15% drop from about $35, where it was comfortable on the chart. It is down more than double that, which is over-sold, in my view, considering even a dividend cut of 50%. That's not gonna happen because they have to pay out 90% of earnings by law.
    Regards,
    Regards,
    3 Jul 2013, 01:19 PM Reply Like
  • I agree with you. You cannot keep taking losses and sell a stock. His recommendations are sometime pretty radical. He is starting to lose credibility with me.
    3 Jul 2013, 02:24 PM Reply Like
  • He's been pretty consistent over the course of the years he's had the show with his view that any accounting issues mean you sell immediately. If he had listened to his rule, and sold when Barron's and Hedgeye first raised the accounting issues at $38, he would have saved people a lot of money. Sure he's been wrong, but you can't fault him for following his rule that when the SEC looks at the accounting, its time to sell.
    3 Jul 2013, 02:58 PM Reply Like
  • His problem too is that he tells you to sell because of accounting problems AFTER it has fallen 25%. So you get the 25% loss, thanks for the advice! How many 25% losses can you take before you start thinking that riding these out may be a better strategy.
    3 Jul 2013, 04:27 PM Reply Like
  • The guy is a train wreck, now we can see what was behind today's massive drop...he's even admitted on camera how all those people first get CNBC into the loop, and after positioning either long or short, then do their round turn; the man is manic and that is why the mercurial style and changes...
    3 Jul 2013, 05:03 PM Reply Like
  • I mean what it comes down to is that if you read the Baron's article and didnt understand why there was a question about the accounting of puts for hedging as a depreciable asset or not, you should have sold LINE the next day, because you didnt understand the investment you owned. If you choose to rely on a guy with a tie with a sound board for investment advice, why not ask the announcer at the baseball game his thoughts? Or the DJ at the wedding?
    3 Jul 2013, 06:02 PM Reply Like
  • Mike,

     

    If the link below is the work of Hedgeye, I am not impressed at all. There is so much incompetence in the writing in regards to GAAP and what GAAP requires. They and Barrons' believe that LINE had Net Losses in 3 out of the last 4 years. They take the GAAP numbers at face value. Totally out to lunch. Maybe there is something to the adjusted EBITDA and DCF, but I find it hard to believe there is anything wrong with the GAAP audited financials. The author in the link believes there is something wrong, due to his own incompetence, and some of what I've read in regards to Hedgeye and Barron's leads me to believe the same about them, that they are really incompetent to know if there is a problem. I suppose the SEC investigation will clear things up, I hope. (You can go to "home" in the link, and select to read articles 90 days or older without having to join. Type in "Line" and the article should pop up.)

     

    http://bit.ly/13pLvtd

     

    Here are my comments in regards to the above link:

     

    http://bit.ly/14ODL0R
    3 Jul 2013, 07:47 PM Reply Like
  • I mean MLPs exist to grow the distributions to unitholders, so DCF is the only thing I care about. The "maintenance cap-ex" for the puts is a fair question, in my opinion. It should have been an easy one to explain - how does LINE account for the additional costs likely to occur as previously entered into positions need to be exited or re-opened? I haven't really looked for an answer, since when I saw LINE needed the acquisition to be able to cover/raise their distribution, I knew I wanted nothing to do with the company.

     

    Yes that article is not the best in terms of conveying a message, but if it was such nonsese, why couldn't Linn put the issues to rest with a quick press release?

     

    Since the Linn piece in Baron's, I've said that accounting for the puts as a capital cost, and thus depreciating it, makes sense to me. Not sure if thats how its suppose to be done, I'm not an accountant, but it seems logical. But, if its a cost, the cost of re-entering the position should be in there somewhere as well. More importantly, as gas hedges roll off and reset to lower levels, what happens to Linn's DCF? Unless they continue buying very large assets, it should go down, as realized prices drop. It turns into one question in my head to 2, then to 3, and they all point to lower DCF, and thus a lower unit price.
    3 Jul 2013, 10:45 PM Reply Like
  • He lost credibility with me decades ago.
    4 Jul 2013, 08:48 AM Reply Like
  • Lots of deep thinking going on here. But he is a trader and that's what they do.
    3 Jul 2013, 11:59 AM Reply Like
  • Jim has always had the same opinion of companies that have accounting irregularities - SELL. No course change there.
    3 Jul 2013, 12:00 PM Reply Like
  • Yeah but before the SEC investigation was announced, Cramer came out w a piece on thestreet.com saying that LINE's accounting practices were fine. He should view this as a buying opportunity if he genuinely believes that to be true. (Long LINE).
    3 Jul 2013, 12:56 PM Reply Like
  • I think he tweeted there was going to be another call 7/3/2013..I could be wrong....
    3 Jul 2013, 12:02 PM Reply Like
  • unless i misunderstood -- he cannot hold stocks in his trust that are under any scrutiny .
    3 Jul 2013, 12:05 PM Reply Like
  • I lost a bundle taking Cramer's advice to buy LNCO. Now that he changed his mind, its too late for me: price dropping rapidly and I missed the exit.

     

    On the other hand, I think it is unfair to dump just because of a pending examination. SEC could determine there are no irregularities. That's my hope. LINE and LNCO will recover when SEC finishes.
    3 Jul 2013, 12:06 PM Reply Like
  • There is no sense losing everything while watching LINE & LNCO dive some more. I bit the bullet early this morning and sold, saving a few hard-earned dollars in the process. My sense is that LINE & LNCO will recover in time, but it may take a while before I buy back into them. We do not have a clue as to what the SEC will find and how long it will take them.
    3 Jul 2013, 12:49 PM Reply Like
  • Give the guy a break. He makes calls on over a 100 stocks a week, it is categorically impossible to get everything right, or even the majority of those calls right. Situations change, unexpected outcomes occur, the best traders acknowledge mistakes, revise their position and move on
    3 Jul 2013, 12:21 PM Reply Like
  • No, don't give the guy a break. He gives investment advice on TV for a living. To the extent that he sucks at that (see his call on LINE) he should be criticized.
    3 Jul 2013, 01:00 PM Reply Like
  • Even more to the point, he charges us (his clients) money for his Action Alerts subscription service.
    I would be interested in seeing what his other portfolios hold and how their actions compare with the charitable trust.
    3 Jul 2013, 04:27 PM Reply Like
  • This takes the BRY/LNCO arbitrage off the table. Heck of an opportunity to just buy LNCO.
    3 Jul 2013, 12:23 PM Reply Like
  • I hope this in indeed an opportunity but I'm so far under on this one (LNCO) now, that I can't convince myself to buy any more. Even if I believe that one day it will return to my ~$36 basis, I already have about a 5% position in this one, and that's all the bigger I'm going!
    3 Jul 2013, 12:44 PM Reply Like
  • This is a Bear Raid pure and simple. With the pending merger with Berry, raiders saw and opportunity to put the deal in question by raising questions about accounting. I think the doubts about the Berry deal are a bigger hit on the stock then the accounting issue. Leon Cooperman, who's one of the smartest and conservative investor on the street, says he's done his due diligence, is comfortable with Line's accounting and the company is worth 40 bucks even without Berry. I'll trust Cooperman over Baron's any day. Looking at the options chains, their is a lot of interest in the out of the money calls.
    3 Jul 2013, 01:29 PM Reply Like
  • Your honesty impresses me. Most around here never admit a loss. But if LINE starts back up hundreds will post matter of factly that they bought it at the bottom.

     

    Sadly I had a order from 10 days ago to buy at $27 which I forgot to cancel. I feel your pain bonsaibean.
    3 Jul 2013, 02:15 PM Reply Like
  • Option prices are high because of the monthly dividends and volatility. They don't signal an justification of the business model.

     

    As for trusting Cooperman over Baron's, if you sold when Baron's said sell, you sold at $38, if you bought when Cooperman said he liked it, you bought at what, $33? Its under $23 as of close today. I trust the price, and Baron's has been right.
    3 Jul 2013, 03:06 PM Reply Like
  • Long at $38 and at $35 on LINE. Will hold as long as the dividend is paid at the same level. Considering buying more. I believe it's not more than an orchestrated Bears raid (and SEC should look into it) as well as lawyers who seek to make a buck for themselves and stirring controversies. SEC investigation might be a positive event after all and might set the score of who is right once and for all clear things up and I would be happy to see bears running to cover their positions.
    4 Jul 2013, 05:17 AM Reply Like
  • In this hair trigger low volume market which immediately sells any perceived bad news, doesn't take much to move a stock. As a trade, selling on the Barron article proved to be right, as an investment, I think Cooperman will be right.

     

    Ps. Bought BP at 28 because I thought that was over done as well. Plan on buying more LINE as soon as I see a floor.
    6 Jul 2013, 11:51 AM Reply Like
  • ybny0707

     

    have been buying 200 Lnco every month since the beginning of year, plus long 1100 Line. Always buy the day before ex date so this month was great. I have no use for the SEC because they never cleaned house.
    11 Jul 2013, 09:30 PM Reply Like
  • Sorry Phil2K. No, I won't give Cramer a break. For me, he offers merely entertainment value, at best. But others commenters are right - many Mom and Pops actually pay attention to what he says. He speaks with great authority, sounds like he knows what he's talking about. If his record is as dismal as you say it is, then he should be taken off the air, period. There's no value, not even entertainment value, in a trader who has such a bad record and yet has the power to influence others' decisions.
    3 Jul 2013, 12:44 PM Reply Like
  • mb-

     

    amen.

     

    -rwm
    3 Jul 2013, 02:00 PM Reply Like
  • Thanks Jim... after investing 10s of thousands for my Dad's account, this... thanks for the massive loss...
    3 Jul 2013, 12:56 PM Reply Like
  • Cramer is a smart guy but he changes positions on stocks as often as he changes his socks. You can get hurt bad following his sometimes ultra upbeat positions!
    3 Jul 2013, 12:57 PM Reply Like
  • Cramer evaluates and gives opinions on stocks (companies) on a continuing live (dynamic) basis. He changes on a moments notice because circumstances change that quickly in the market. When new info comes out, he evaluates and creates an opinion for the moment. He is not your personal advisor and doesn't know your investment needs. If you're going to invest on his every work you better make sure you hear his ever work in real time.
    3 Jul 2013, 12:57 PM Reply Like
  • The way Linn does their books hasnt changed. If Cramer a lawyer looks at their books and says they look normal then he should stand behind that statement
    3 Jul 2013, 04:27 PM Reply Like
  • This guy should not be on TV. Yes he is a showman but he loses people money.
    3 Jul 2013, 12:58 PM Reply Like
  • I am reminded of a TV program that I watched as a child. The ''Howdy Doodie Show'', somewhat scripted but with a spontaneous ''peanut gallery'' . You see, the cast of the show had a clown named Clarabelle that danced around and honked his little horn whenever he wanted wanted to make a point....regretfully, Clarabelle was a mute and Cramer is not.
    5 Jul 2013, 09:49 AM Reply Like
  • Cramer never made me lose money; I lost it by myself. If you have to blame him, you'll never learn the lesson, but people always try to blame someone. Cramer, I'm sure, did not tell anyone to make a good til cancelled order, either. Psychologically, I doubt that following the childish instinct of blaming someone really makes one feel better.
    Remember when you bought, you liked the dividend rate; it hasn't been cut, so you're still getting a good return.
    Cramer has made recommendations that I have ignored, before, and I have been right as often as he has. You don't lose money until you sell, so saying "he lost me money" is bunk. The price of a stock is not the value; it is what one person was willing to pay for something someone wanted to sell.
    5 Jul 2013, 10:40 AM Reply Like
  • kerps

     

    he does not lose peoples moneys. he expects you to do your own homework. True he got it wrong so how many bought in after the fall and are now smiling because the chicken littles ran.
    11 Jul 2013, 09:19 PM Reply Like
  • Agree: You don't lose money unless you sell a stock when its down! If you want to sell, do it quickly. Don't wait until you've lost a ton of cash.

     

    I'm holding a few losers, but thanks to old Ben, my losses are diminishing!
    19 Jul 2013, 11:13 PM Reply Like
  • hmmm,... why is he making recommendations then if he has NO CLUE about this or any other stock ??? Are you not supposed to put a little time into checking them out first ???
    3 Jul 2013, 12:59 PM Reply Like
  • If Cramer is not allowed to hold companies under investigation he should of said that. What he is "saying" by his actions is " I was wrong the shorts are right. "There are many things he could have said to help the Mom and Pop through this. Like" I have to sell because that is my discipline but I still think the accounting is OK."
    3 Jul 2013, 01:01 PM Reply Like
  • I always laugh when people bag on Cramer. Its always I bought something Cramer said to and lost money. He even says don't buy on his recommendation to do your homework and buy if you feel like its a good investment. I mean he has lots of restrictions put on him because he is on CNBC and writes about stocks, that make it hard for him pump and dump. i have no problem with him changing his mind. i mean they are stocks you cant fall in love with them if the circumstances change you have to change also.

     

    I am not a fan of holding stocks that are under investigation but there has been a lot of hype drummed up by short sellers and people with their own agendas.

     

    also a disclosure i am a member of Cramer's Actions Alerts Plus, and made money even after paying the subscription fee using his advice
    3 Jul 2013, 01:30 PM Reply Like
  • Why was Jim saying buy when Barron's and the other naysayers were saying bad accounting bad accounting? I don't think Jim investigates stocks as much as we think he does. He makes his money by saying not by doing.
    3 Jul 2013, 01:30 PM Reply Like
  • What about "nobody ever made a dime by panicking"?
    3 Jul 2013, 01:31 PM Reply Like
  • I believe that Cramer has admitted in the past that he's used his public recommendations to manipulate stock, so I would never buy or sell anything based on what he says. He like so many others has other agendas. View him as a source of entertainment, but not as a source of information for stocks.
    If this is a bear raid on LINN, and BRY is happy with the deal, isn't the answer for BRY just to ink it today, announce it publicly, and squeeze the shorts so they turn blue and explode? Wouldn't it be great to give something nasty back to the Big Money that's been manipulating the market(and the SEC) for the last 5 years?
    3 Jul 2013, 01:46 PM Reply Like
  • They can't ink the deal because the SEC hasn't approved it yet. The SEC is investigating a non-GAAP issue and I think in the long run this will shut up the shorts.
    3 Jul 2013, 02:29 PM Reply Like
  • There should be a requirement that everyone uses the same accounting treatment for this type of business. It would be interesting to know how other mlp's treat their hedges. I can see it both ways - capitalizing the hedges over the life of the hedge or expensing it. Obviously, expensing it is the more conservative but does it understate the value of the hedge because the hedge has value up until expiration.
    3 Jul 2013, 02:20 PM Reply Like
  • The GAAP accounting is the same for every company, IMO. GAAP establishes standards that are established by the accounting industry. non-GAAP measures, such as adjusted EBITDA and DCF can vary by company. That is where the problem lies, IMO. When the non-GAAP measures materially vary from the GAAP, then you got a problem, IMO. That's the case with LINE.
    3 Jul 2013, 02:40 PM Reply Like
  • I bought Lynn oil not for raising stock prices but for the dividend. I am just going to hang on. Remember they have NOT downgraded their dividend. So even if the stock has dropped your dividend will be the same at any price.
    It will be stronger and better after the SEC probe is over.
    3 Jul 2013, 02:24 PM Reply Like
  • I agree. Same with BBEP and VNR. As long as the dividend remains steady, we are being paid to wait. Keep reinvesting at lower share prices and wait for a turn around. Check back in six months :) I think some of the turmoil is from covering shorts. And what if no irregularities are found?
    3 Jul 2013, 04:28 PM Reply Like
  • I wondered what Cramer would do. He has a policy of getting out of any company with suspected accounting problems. I emphasize "suspected". I'm not convinced LINE has a problem. Looks to me like they calculate DCF like any other company. I'm not saying the DCF calc is good, because I don't think it is, but LINE's is no different than any other MLP as far as I know.
    3 Jul 2013, 02:37 PM Reply Like
  • Most of us are investors; Cramer is a "trader" to his bones, and even if he tried to change, it would be impossible, IMO. He is amazingly knowledgeable and you can learn a lot paying attention to him, but I take ALL his recommendations for ":trading", not investing, whether he admits it or not. He is able to quickly analyze facts and make split decisions. Traders hate to hold losing positions, and people cannot rely on his recommendations for anything more than short term trading, because that is Cramer.
    His wisdom and experience are invaluable to those without either, but you must make your own investment decisions, taking what info you can from wherever you can. Gather, evaluate, and consider the source, then place your bets.
    Regards,
    3 Jul 2013, 02:38 PM Reply Like
  • It may not be that simple; the concern is if their accounting on the puts/hedges changes the nature of the cash flow it will also mean a cut in the distribution/dividend in the future. If everybody knew for a fact the payout to shareholders was very secure the hit to the stock would have been more in the range of -3% to -7% and that hasn't been the case.
    3 Jul 2013, 02:44 PM Reply Like
  • "It may not be that simple; the concern is if their accounting on the puts/hedges changes the nature of the cash flow it will also mean a cut in the distribution/dividend in the future. "

     

    I wish I could get my hands on the details of what Barron's and Hedgeye are thinking. Nothing of what I have seen from them leads me to believe they know what they are talking about. I'd love to confront them eye to eye to see just what they got. To me it's not the puts, but the DCF formula that's the problem. But, what do I know.
    3 Jul 2013, 03:21 PM Reply Like
  • This would not be the first time, it would be one in a long string, of bearish comments by Barrons followed by a strong recovery. I used to think it was just Abelson, but now that he's dead and the pattern continues, it's almost a good contrary indicator...a "Wrong-Way" Barrons indicator. And I will be betting my new shares tomorrow on it.
    4 Jul 2013, 06:47 PM Reply Like
  • I think you're right, Bryce. What can they do bookkeeping the cost of Options? Expense them or what? Capitalize them if they are Leaps, maybe? But how much difference could that make? Linn states they expense them, and that seems most conservative to me.
    I subscribed to Barrons mainly for Abelson's wit, and found the paper responsible, informative, but not infallible. Columnists write those things, not "Barrons". These guys are not all that knowledgeable about Accounting, and MLP's are more complicated than regular stocks, so I do not take their "guesses" terribly seriously. I aLso think the SEC's interest might be based on a BRY stockholder claiming LINE is overvalued in the exchange agreement, underwriters claims to the contrary.
    If anyone thinks that most moves in stocks are justified, he will probably sell at the bottom, in MOST cases.
    Regards,
    6 Jul 2013, 10:09 AM Reply Like
  • If you are in..... you're in.
    So what are you gonna do?
    Sell Friday, no matter what?
    You might downsize the share count.
    OR you might just wait this out a little longer.
    OR NOT.
    Good luck, I'm in.
    snow
    3 Jul 2013, 05:56 PM Reply Like
  • To the Hell with Cramer,
    Now what do we do. I own the stock
    Kisses again. I lose
    Peter
    3 Jul 2013, 11:17 PM Reply Like
  • I have 2 short puts and I am rolling to Dec. and forgetting about it.
    I have one long put and I am cashing it in.
    Kisses again.
    Live and learn
    Peter
    3 Jul 2013, 11:19 PM Reply Like
  • I'm shocked! shocked! that Cramer would change his recommendation so quickly. Not.

     

    Cramer is a showman making a fortune on all his Booyah idiots out there. I turn off CNBC right after 9 a.m. when he comes on.
    4 Jul 2013, 12:57 AM Reply Like
  • So are the distributions going to stop? Any massive layoffs going to happen? Are they filing for bankruptcy? Has the Berry acquisition been canceled? Just asking.
    4 Jul 2013, 08:56 AM Reply Like
  • Bankruptcy? lol Why? I think the sell off is overdone. Panic, not reason is prevailing at present. People don't know which way is up. If they understood fundamentals, they'd be fine. Things seem to always over correct. This is no different, IMO. Berry may not happen, but LINE will find another candidate, once all of this is over. It'll be business as usual.
    4 Jul 2013, 09:03 AM Reply Like
  • Very well said... overcorrections usually caused by weak holders and institutions who cannot hold during SEC investigations puking up stock, with short sellers and put buyers leaning further. I would think the BRY deal in real jeopardy now but this is priced in at the 7/3 close IMO.
    4 Jul 2013, 07:35 PM Reply Like
  • I can't remember who asked.
    "why couldn't Linn put the issues to rest with a quick press release? "
    The answer is they did. It should be on there web site. Week or 10 days ago.
    4 Jul 2013, 09:27 AM Reply Like
  • No, there is only the voluntary disclosure, no real press release with any significant content. Link to it please if I am incorrect.
    4 Jul 2013, 10:39 AM Reply Like
  • I question the validity of this kind of format--where a "media star" promotes/demotes stocks for the masses. As they say in booyaland, "dere awta be a law ..."
    4 Jul 2013, 03:39 PM Reply Like
  • After the recent attacks on Linn, Cramer said (on 6/21, I think) that he and his people (he's not a one-man-show) had looked into the situation and were confident that Linn was in the right. He also cited his "mentor," Leon Cooperman as also being confident about Linn. Days later Cooperman was on Fast Money on CNBC and spent a lot of time re-affirming his confidence in Linn.

     

    Now, Linn tells about an "informal inquiry" and that causes Cramer to change his mind??? Well, he has said before that when the facts change, he changes his mind. Hmm, this was an "informal inquiry" from the SEC -- no facts.
    http://bit.ly/12j17cE
    4 Jul 2013, 10:05 PM Reply Like
  • Cramer reminds me of the old snake oil salesman. "Step right up ladies and gentleman, have we got a deal for you...
    5 Jul 2013, 12:52 PM Reply Like
  • Cramer was not the only one to like Linn, and don't forget that he has a staff behind him.

     

    I'm holding on to my LINE, LNCO & BRY.
    5 Jul 2013, 01:11 PM Reply Like
  • Bought LNCO for 24.4 :). YEAH YEAH YEAH YEAH :)

     

    When I saw this other article today on SA (James) I had enough contrarian indicators.
    5 Jul 2013, 02:26 PM Reply Like
  • LNCO went ex-div yesterday for its first MONTHLY
    distribution, paydate July 16th .2416 per mo.
    Looks like the promise of monthly dividends is being
    applied.
    Stay tuned for the SEC comments.
    9 Jul 2013, 10:41 AM Reply Like
  • One thing you can say for Cramer is that he's slick, glib and devious.

     

    Oh, wait a minute, those are three things.

     

    Thanks.
    20 Jul 2013, 10:52 AM Reply Like
  • I often get rid of a stock after Cramer has "discovered" it. It does not happen that often as my kind of stocks are not usually Cramers. In the case of Linn having held since 06 and adding during the crash at $14 you can see there are tax issues to contend with. I hope the rummer that the guy at Barrons is being investigated for working with a short seller is true. Now that would be fun.
    20 Jul 2013, 03:16 PM Reply Like
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