Syntax-Brillian: The Bears' Latest Folly?

Well, you have to admit that the Bears have looked awfully foolish of late. For the Bulls that love a squeeze I can imagine them saying “oh let me count the ways” as short squeezes have been getting as common as pigeons in a New York Park. To name only a few of the most recent, pointless, overcrowding of the short count:

Shorting Dendreon (NASDAQ:DNDN) below 5.00 was a horrible misjudgment, and you have to wonder how so many millions of shares crowded in at those levels. Over 25 million shares watched their short positions sky rocket to over 26.00 at one point. But there is a very old saying “One person's foolishness is often another person's wisdom”. And all too often of late, Bears assuming the first crowd did their due diligence simply followed the herd and assumed at least somebody did their homework, only to discover later an absolutely absurd number of Bears represent over 40% of the float and not a single Bear has a thesis as to why.

The Bears foolishness is by no means limited to Provenge at DNDN, a life extending drug for cancer patients that extends a mans life. It has been as simple as not understanding the allure of a cold sweet tasting Jones Soda (JDSA), a great product that is growing distribution in some of America’s largest retailers. JSDA foolish Bears helped propel the stock at one point from the 14.00 range to well over 32.00.

The Bears dismissal and lack of understanding the power and growth and marketing abilities of (NASDAQ:AMZN) also helped propel Amazon from the Bears Bulk entry point at sub 40’s to over 60.00. Bull’s worldwide offer these aforementioned Bulls a sharp crisp military salute. Fellow Bears, meanwhile, no doubt can only offer the their fellow bears the solace of “I Feel Your Pain.”

So what to make of the absurd 15.35 million short positions of Syntax-Brillian (BRLC)? The ninth highest ranking analyst out of 3,400 has some thoughts on that. "I think this is going to be one of the biggest short squeezes of all time." Over 40% of BRLC float is shorted and that should have been an absolute non starter right out of the gate. So how in the world will they cover that many shares without creating what the Bears of late do best? A squeeze is yet again inevitable, providing BRLC gives a surprise on the forward guidance for FY 07, Q4, and for FY 08 that will start on July 01, 2007. Any chance BRLC will increase forward guidance?

Well, I am not sure I can convince the Bears about this or not. After all, when you get a gang of people in a mind set against a life extending drug for dying cancer patients, people against a very tasty soda being distributed in cans versus bottles to help boost profits at some of the Nations largest retailers, a gang doubtful of the immense potential of the internet, a gang that feels the only LCD maker in the world to get three Consumer Rated Best Buy Awards might not sell any, what can you do? But I will at least try, should a Bear be open to reason and common sense, that is.

The only thing that has been slowing what could only be called EXPONENTIAL growth was Syntax Brilliance credit limit, not for long term debt, but for revolving credit to fund receivables. BRLC has since secured an addition 20 million bridge loan with CIT to be increased to 150 million upon completion. As recently reported, “one” of Syntax Brilliance plants in Ontario, California is gearing up to double production, as this plant has in the past been limited to 200,000 units per year and will increase up to 500,000:

A ranking official at Syntax-Brillian disclosed that the company is estimated to sell a total of 500,000 TFT-LCD TVs this year, with 80,000 TV sets sizing 37", 42," and 47" to be provided by Pou Chen's new plant in the U.S.

Increase in credit limit to fund exponential growth, and increased production started at one of the plants to double production, so what about new retailers to sell all these new products? As of late (.pdf), you will find up to four Olevia SKU’s sitting on over 1,500 Target (NYSE:TGT) stores, that is if they are not already sold out. But it does not end there, newest retailers to be added perhaps as soon as the end of this Quarter will be Sears (NASDAQ:SHLD) in stores and the PC giant Dell (NASDAQ:DELL) online.

And if that is not enough to alert the Bears to an increase in forward guidance, what about worldwide LCD demand? “Declining prices have spurred demand, helping LCD shipments to outpace other types of TVs. LCD TV sales may jump 56 percent to 69.7 million units this year, while plasma TV shipments may rise 33 percent to 12.9 million units, according to January estimates by Austin, Texas-based researcher DisplaySearch.”

So to make it as simple as possible for even the most blind Bear that has been caught up in the latest herd shorting a stock that is trading at below a forward PE of 10: Olevia brand has three Consumer Best Buy Ratings. Olevia brands are top sellers at Home Depot (NYSE:HD), Target, Comp USA and Radio Shack (NYSE:RSH) on line stores. Circuit City (NYSE:CC) is increasing their Olevia SKU’s from two to six. CompUSA has already increased their top seller Olevia’s from five to nine SKU’s. Latest retailers to be ramped up with Olevia SKU’s are Sears in stores and Dell on line. New credit allows future exponential growth without the “prior” threat of significant dilution. The Ontario plant is gearing up to double their production of Olevia from 200,000 units to as high as 500,000 units. Olevia recently opened a new market in Japan with NTT for an initial order of up to 20,000 units. Global demand for LCD will grow as high as 56% this year alone.

Seasonally, LCD demand has grown this quarter over last quarter. LCD panel prices have been stabilizing. Syntax Brillian is currently opening new LCD channels in Europe through the existing Vivitar distribution networks. Olevia latest and very impressive SKU’s are generating higher ASP/Margins; the 42” 742i, 47” 747i and the 65” LCOS have already started selling on line at select sites to include best buy business on line with the 42” 742i for $2,391.16 higher priced then some sites, but given the speed they sell out, and some sites asking over $3,000.00, I don’t blame them. And finally, the country's top rated analyst predicts a short squeeze, and the Bears failure to heed CIBC Daniel’s Gelbtuch’s “Buy” and “Strong Buy” warning’s in the past have certainly paid dearly as Daniel climbed to the impressive top 9 out of 3,400 position of Analysts and proved without a doubt that he is not only very accurate in his calls, but exceptionally accurate.

I have a feeling even the crowd in Palm Beach that had difficulties following an “arrow” would start to see the light by now. With earnings and forward guidance to be given at the closing bell on May 10th, I wonder when, if ever, the Bears will do any simple due diligence, at what price they will cover, or like the DNDN, JSDA, AMZN Bears simply be squeezed and forced in to covering? It is exactly this type of Bear folly that wrought the dirges so frequently heard this year one stock after another. I believe the Bears latest folly will be exposed after the bell May 10th 2007.

Disclosure: Author has a long position in BRLC

BRLC 1-yr chart


About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here