Our Citron Research review takes a look at the impact they have on stock trading. They’ve been around for 14 years. Their newsletter and stock commentary has been popular amongst traders. As a research company and hedge fund they were in the news recently because of GameStop. Their shorts of $GME and the fallout from that have become legendary.
Is Citron Research Reliable?
- Before 2021, we wouldn’t have been looking for a Citron Research review. After what happened in January, Citron wasn’t on anyone’s radar. Then GameStop happened. Before that, they were a well respected and reliable company. Are they still that? Yes. They were shorting $GME based off fundamental analysis. Which is reliable. But things happened. And now opinions have potentially changed.
Citron Research: Shorts That Lost Their Pants
“Let’s storm site B” screamed a player after the entire team had moved towards A. On spotting enemy players on the site, a game of shooting and subterfuge began.
When the dust settled, the first team had successfully won the round. Both teams congratulated one another and began the next round immediately.
The surprising part was that none of the players were even in the room together, connected over the internet and coordinating quick responses in rapid time.
They were playing the famous first person team based shooting game: Counterstrike. This same scenario was being played around on millions of computers across the globe as players across continent learnt to coordinate and unite in their efforts. Millions more joined in other games like World of Warcraft and Ragnarok. This same generation a decade later, enriched by their experience of coordination, led a raid on the biggest players on the market with their weapon of choice. Which ironically sold Counterstrike: GameStop, making headline news and getting everyone involved in the stock markets. Hence this Citron Research review.
We Like to Trade Well
For most of us who have ever dabbled in the stock market, we buy stocks on what we feel or what we hear.
This is where Citron comes into play. As a company who researches stocks, you want to know what they say.
Researching penny stocks is going to yield different results than researching a stock like Apple ($AAPL). When we make a good trade based on what we’ve learned, we’re pretty proud of ourselves. The saying “Buy the rumor, sell the news” is incredibly accurate. Where do you get your news? From a place like Citron. So we looked at this company and delved into a Citron research review so you know what to expect
A Citron Research Review on Short Selling
While the profits we make are small, the losses we bear are huge. Most of us lose money on our purchases when the stocks we buy crash to the ground faster than a drunk on a Friday night.
We begin to wonder, is there a way to make money on these falling companies? And the answer is Yes: via short selling. How does shorting work? In short selling, a person borrows shares from the broker and sells them in the market in the hope of buying them back at a lower price in the future. For example, say if I want to short blockbuster at $100, I’ll borrow some Blockbuster shares from my broker and sell it in the market at $100.
Bad news comes and it falls to $70. I’ll buy it back and return them back to the broker making a cool profit of $30. Like the law of gravity in real world where things fall faster than they rise, markets as well fall faster than they rise.
As a result, making short selling an attractive venture. However the risks in short selling are humongous. When you purchase a share, the maximum you’ll lose is the entire amount as the share goes to zero.
It cannot go below zero. There’s no upper ceiling to a share price, however. Hence shorts are theoretically exposed to unlimited risk if the prices keep going up and up.
And one can lose more than the entire amount. In some cases, even become bankrupt. So how does a Citron Research review come into play?
What Is Citron Company?
- A Citron Research review shows us that this is a company provides an online newsletter looking at overvalued stocks. Why? Short selling is their bread and butter. So their newsletter looks for overvalued companies and the hedge fund shorts them.
Finding a Shorting Newsletter: Citron Research Review
So for us small traders, it would be beneficial if we had some advice to back us up on the stocks we’d like to short. There’s tons of research available on the market that tells us to buy this stock.
And tons more to tell us why the stock is good and why one must invest. However, there’s very little research available for shorting stocks.
As history has taught us, all weak and fraudulent companies eventually succumb to their issues and destroy shareholder wealth in the process. Andrew Left recognized this gap from his own personal experiences and launched Citron Research in 2001 to exclusively publish only short selling reports.
Who Owns Citron Research?
Our Citron Research review found that Andres Left owns the company. After a terrible experience being forced to push shady investments to unsuspecting customers, Andrew Left began shorting stocks full time and writing and publishing free research reports on firms he felt were overvalued or engaged in fraud. He founded StockLemon.com in 2001 later rebranded as Citron Research in 2007. Then began publishing controversial reports on these weak and fraudulent companies via a blog.
How Does Citron Research Work?
He was prominent in his short of Valeant Pharmaceuticals; taking on Bill Ackman who was on the board of Valeant at that time. His series of reports began an investigation by Senator Bernie Sanders.
And exposed the channel stuffing and sham transactions that Valeant was using to inflate drug sales. His reports pushed the SEC to investigate and eventually expose the fraud.
As a result, shares of Valeant dropped 90% from its peak. Imagine shorting a share at $100 and seeing it fall to $10 so quickly. That’s the attraction of short selling.
Citron Research has a history of publishing accurate and effective reports. As Andrew Left himself claimed in the Wall Street Journal (WSJ), “Fortunately I have been more right than wrong”.
According to the WSJ, out of the 111 reports published during the period 2001-2014, there was an average decline of 42% in the year after the report was published.
Of those 111 companies, shares of 90 were lower in the next one year and 21 were higher. This is a pretty impressive track record.
And one which is commendable and dependable for retail traders like us when compared to the numerous buy reports we see generated on those same shady stocks.
The GameStop Phenomenon
Citron Research emerged in the limelight with their short position and recommendation on GameStop. Which is where this Citron Research review came from.
Their report was valid and made business sense of GameStop’s failure to compete with digital gaming platforms. And there was the accelerated demise of retail due to the pandemic which compounded their problems.
As a result, this short position was overloaded by certain hedge funds who let their greed overcome all risk control measures.
The Reddit group r/wallstreetbets initially considered to be a bunch of amateurs proved that their research on the GameStop short position was solid and well executed.
So while the short squeeze was directed towards those hedge funds, Citron Research got caught in the frenzy as well. Attacks began on Andrew Left and Citron Research.
Which soon turned personal with Left’s social media accounts hacked, fake tinder profile created and people ordering pizza at his home.
This forced Left and Citron Research to declare that they’ll stop publishing short reports. They had already covered their short position in GameStop at a significant loss.
When prompted for the reason behind this change, Andrew stated that he had started Citron Research to stand against the establishment and protect the retail traders from Wall Street.
But after 20 years, he felt that they themselves had become the establishment. Citron Research had begun publishing reports for buying stocks a few years ago.
So he made an announcement that they’ll now focus on making recommendations for buying stocks only.
Short Selling Bastion
Short sellers are the last bastion for exposing frauds and bad companies. They’re the ones who put their money on the line and are willing to search every nook and cranny for the evidence.
They however, get a bad rep because a company stock price falls due to the exposure of their issues. Successful and large companies have managed to demonize short sellers and their work.
It doesn’t help that they make their money when others lose theirs. However what many in the retail segment don’t realize is that short selling allows one to gain control of their fortunes.
Instead of becoming a victim to fraudulent company practices. A company which allows for retail traders to participate in this and win instead of lose has to be promoted and revered. Instead of being reviled like the way Citron Research was.
The Bottom Line
Only time will tell the effects of the loss of this research firm. But one thing’s for sure, this will be a distinct disadvantage to retail traders like us who want to save ourselves from bad and fraudulent investments.
Our Citron Research review let us know that we’ll miss their research for shorting. Which allows you to make money in a bearish market. And that can’t be a bad thing.