PLUG Must Be the Envy of All $500-$1,000 million Market Cap Company CEOs

The trading dynamics of PLUG continues to fascinate me (and fortunately, PLUG has been good to me). Let me pose a simple series of questions/thoughts to illustrate why PLUG continues to fascinate and perplex me:

  • Historically significant news is not being released daily, yet PLUG’s shares trade as if this were the case (recently, PLUG has traded 30-100%+ of its market cap… DAILY).
  • I know many $500-1,000 million market cap stocks that might trade 5-15 million $ daily (i.e. trades 1%-3% of market cap daily).
  • It usually is a highly rare event for a company’s stock to trade over 20-30% of its market cap.
  • It is a very, very, very, very, very rare event for a company’s stock to trade 50-100%+ of its market cap.
  • I’ve never seen a legitimate company’s stock (of material size) trade like this before.
  • If I’m a CEO of a $500-$1,000 million market cap company, I would not understand why another company’s shares trades 30-100+% of its market cap 5-15 trading days consecutively, especially absent commensurate news/developments

Here is how PLUG has traded since I first wrote about it (fyi, I’m following PLUG, and writing about it, largely because I’m quite fascinated by what i see as a obviously anomalous activity… the kind of activity that, if I a regulatory body, I would flag immediately and investigate within 48-72 hours):

PLUG – 30%-100%+ of its Market Cap Traded EVERY DAY recently. Why? NOT due to news.
Date Open High Low Close Volume Adj Close Value Traded
3/28/2014 6.85 7.15 6.68 6.9 26101500 6.9  $        180,100,350
3/27/2014 6.55 7.19 6.21 6.89 45187800 6.89  $        311,343,942
3/26/2014 7.63 7.86 6.26 6.45 1.19E+08 6.45  $        769,179,915
3/25/2014 5.93 8.48 5.8 8.48 1.37E+08 8.48  $    1,161,942,320
3/24/2014 6.1 6.23 5.56 5.69 26559500 5.69  $        151,123,555
3/21/2014 6.09 6.12 5.33 5.94 52721500 5.94  $        313,165,710
3/20/2014 6.1 6.33 5.91 5.97 27852300 5.97  $        166,278,231
3/19/2014 6.19 6.57 5.99 6.21 52422400 6.21  $        325,543,104
3/18/2014 6.49 6.59 5.82 5.96 56945500 5.96  $        339,395,180
3/17/2014 7.18 7.34 6.27 6.51 58073600 6.51  $        378,059,136
3/14/2014 7.48 7.99 6.58 6.71 75379800 6.71  $        505,798,458
3/13/2014 7.58 8.48 6.96 8 1.31E+08 8  $    1,050,784,800
3/12/2014 5.82 7.4 5.32 6.8 1.41E+08 6.8  $        961,299,000
3/11/2014 11.44 11.72 5.95 6.03 2.44E+08 6.03  $    1,473,620,445
3/10/2014 9.23 11.41 8.57 10.31 2.12E+08 10.31  $    2,183,221,887
3/7/2014 6.79 8.35 6.53 8.27 1.26E+08 8.27  $    1,039,927,690
3/6/2014 6.45 6.69 6.02 6.36 47838600 6.36  $        304,253,496
3/5/2014 6.96 7.01 6.45 6.75 56042600 6.75  $        378,287,550
3/4/2014 6.46 7.09 6.24 6.69 1.21E+08 6.69  $        812,396,136
3/3/2014 4.6 5.83 4.5 5.82 84414000 5.82  $        491,289,480
2/28/2014 4.51 4.84 4.45 4.67 37353600 4.67  $        174,441,312
2/27/2014 4.38 4.57 4.25 4.37 21812200 4.37  $          95,319,314
2/26/2014 4.49 4.64 4.25 4.41 52906000 4.41  $        233,315,460

Macro Firms Have Struggled Overall this Year

According to https://twitter.com/ldelevingne , here http://www.cnbc.com/id/101523064

Macro firms have struggled overall this year.

Prominent examples, according to people familiar with the performance and a report by HSBC Alternative Investment Group, include:

  • Brevan Howard Fund (down 2.56 percent through February)
  • Caxton Global Investment (down 3.51 percent through March 17)
  • Fortress Macro Fund (down 7.10 percent through March 14)
  • MKP Opportunity (down 4.77 percent through March 25)
  • Tudor Global Fund (down 3.51 percent through March 14)

David Einhorn, Greenlight Capital, MU, and … GMCR .

I have not been following the Micron Technology/Seeking Alpha/Greenlight Capital/David Einhorn drama closely. However, one specific statement written by Eli Hoffmann of SA (who I believe is nothing short of a gentleman and scholar) got my attention (as it pertains to Green Mountain Coffee Roasters “GMCR”) :

So why did they [Greenlight Capital] drop the case? It seems they were able to contact the author, who convinced Greenlight that he had built his thesis by joining the dots on publicly-available information.

Source: http://seekingalpha.com/article/2106353-seeking-alpha-and-david-einhorn-the-real-story

I do not know nor hold an opinion of the veracity of the above claim(s), though apparently Einhorn appears to http://seekingalpha.com/article/2106353-seeking-alpha-and-david-einhorn-the-real-story#comment-31860863 .

However, I do know this: I for one, correctly guessed that Greenlight Capital was short GMCR in 2011 (before Einhorn revealed it publicly in the Fall), based on my own “joining the dots on publicly-available information.” Here’s how I did it:

  • I was short GMCR and a few other stocks in 2011.
  • I read Greenlight Capital’s Q2 2011 letter to investors. http://www.gurufocus.com/images/pdf/Qlet2011-02.PDF
  • The last paragraph on page 3 got my attention: “the consumer cyclical short that hurt us most in the first quarter…”
  • I had felt Greenlight’s pain. Their description of this ‘consumer cyclical short’ was uncanny. I ‘felt’ and observed exactly what they were talking about.
  • A friend and I discussed the letter. We wondered which company Einhorn was referring to. I guessed GMCR. My friend guessed another company.

I had never discussed GMCR with Greenlight Capital, Einhorn, or any of their associates, affiliates, etc. GMCR eventually became my largest and most concentrated short position, ever, in my life when the stock was trading between 90-116/share in 2011. (it also ended up being my most profitable). I had shorted GMCR for many reasons, but my belief that Greenlight was short GMCR (as well as a few other factors) gave me the conviction to “go for the jugular”, and size with concentration.

When Gaapuccino came out in the Fall… I was in for a pleasant surprise, as well as validation of my belief Greenlight was short GMCR. Luck was on my side.

I do not know nor hold an opinion as to how ‘VALUABLE INSIGHTS’ discovered Greenlight was long, and/or interested in going long (and publicly disclosing) its MU long position, a la their GMCR short position. I for one, however, did not share my GMCR findings publicly… I only shared with my friend.

I guess what I’m getting at is: I sense plausibility re: ‘Valuable Insights’. Probability? No clue, as I do not know the facts. (nor do I care)

Global Macro: Very Difficult (if not Impossible), Very (Most) Important, and… Critical in Coming Years

Claim: I believe global macro-related considerations are the most important when it comes to the art of investing/speculating. Macro matters, and everything falls short of macro.

I also believe global macro will become more obviously important in coming years. This recent (and relatively mild) Ukraine/Russia situation is an opportunity for everyone to prepare for what is to come.

Rather than rigorously support my belief, I include a series of thoughts that have led me to the above beliefs. I welcome (and invite) variant views:

  • Macro considerations (for example, interest rates, tax policies, currency, cross border capital regulations, financial institution regulations, corporate regulations, war, retirement/savings regulations, demographics, etc) can render company-specific fundamental analysis  irrelevant.
  • No investment/trading strategy is more scale-able than global macro – if you want to build a $1, $10, $100, $1,000, $10,000 million position in a security… which markets might allow you to do so without moving said markets?
  • The rules of investing/trading have, can, do, and will change.
  • Understanding the movement of capital (inter and intra country) is inextricably tied to understanding the market mechanism. The market is always and everywhere a voting machine. Valuations (i.e. opinions) are not realized in a vacuum, but via the weighted average vote of market participants (although in some cases, i.e. acquisitions, a single ‘voter’ can set a valuation. But that still is a vote)

There is a time for peace… there is a time for war. There is a time for plenty. There is a time for famine.  There is a time for calm… and there is a time for turbulence.

I believe that understanding the true causes of the relative strength of US capital markets vs. EM capital markets in recent history is key to understanding what will likely happen in coming years. Be prepared.

Important Consideration for the next 2 years:

2 forces that fuel upside risk in US equities next 1-2 years:

  • Domestically, Capital fleeing Fixed Income (equity deemed more attractive). Both current and marginal capital flows.
  • International Capital fleeing EM to US.

US equity markets have been due for a correction, but nevertheless face upside pressure from those two forces. I believe we see much higher and much lower within the next 2-3 years.

Plug Power: Some Historical Perspective and Recent Anomalous Trading Activity

“Life is beautiful…but luck must be on your side.” – Tivadar Schwartz

I study rare events. Some believe it is my stock in trade. Enter Plug Power (“PLUG”). Someone pitched me PLUG as a short several weeks ago, when it was trading between $3.00-$4.00 per share. For various reasons, I was displeased with the short case and passed on it. I did not transact in PLUG or related securities until the last couple trading days.

Luck was on my side. The stock went straight up over the last few weeks, hitting a high of $11.72 per share yesterday morning…before crashing down mid-day, and closing at ~$6.00/share. PLUG fell nearly 50% from peak to trough, yesterday.

On Monday, I claimed, “If you look at $PLUG historical daily traded value since 1999, you’ll see why I suspect recent criminal/illegal behavior.” I may be wrong, I may be right. I would like to elaborate on my opinion (which I stand by), and explain the underlying reasoning behind it.

Unusual and Historically Anomalous Volume

Note the following:

  • PLUG’s 3 largest volume days in its HISTORY (since 1999!) occurred in the last 3 trading days;
  • The value traded exceeded its market value in these 3 days.
  • The price of PLUG rose 25%, 30%, and 9% (intra-day yesterday) on these days, even as volume rose to historical levels. The 25 % and 30% rise ranked in the top <1% daily price increases in PLUG’s entire history.
  • Suspiciously, PLUG share price rise these last 3 days occurred without any headlines, developments, etc. Any positive news (e.g. Walmart blah blah blah) occurred many days ago. So no news, yet historical volume, and historical price increases?
  • Nearly half of the largest volume/value traded days of the top 1% largest volume/daily traded occurred in 2014. (that is, if you rank PLUG’s daily trading by largest volume days, 42% of the 1%

PLUG Historical volume

If the above set of facts do not disturb you, consider the following: if you and I were playing poker, and I went all-in (bet my entire stack of chips) 3 consecutive times, and each time I won because my hand was a royal flush… which explanation is more plausible:

(a) The probability of such an event is blah blah blah

or

(b) He is cheating

Note how I never have opined on the company’s business, accounting, etc. I simply am pointing out mathematically questionable volume and trading activity. The above behavior can only be explained by the behavior of stock promoters, unscrupulous shareholders, and maybe unscrupulous quant/high frequency entities.

I may update this post later with more. Note that this post is not opining on the near or long-term trajectory of the shares discussed.

‘The only capital I can rely on is in my head’

“My father returned from these adventures a changed man. Gone were the ambitions. He was happy to be alive. His ambition was to enjoy life. He liked to live well but he did not want to amass wealth. He considered material possessions an encumbrance which could drag you down or even on occasion cost you your life. He is the only man I know who systematically decumulated his assets. He balanced the gap between his earnings as a lawyer and our rather comfortable way of life by selling off pieces of real estate. As a result he had little left to lose in the war. ‘The only capital I can rely on is in my head,’ he used to say making a pun on the word capital which in Latin also means head.” – George Soros’ foreward to Masquerade: The Incredible True Story of How George Soros’ Father Outsmarted the Gestapo translated from the original Maskerado in Esperanto by Tivadar Soros

USA vs. Anthony Davian (a.k.a. hedgieguy) – filed February 27, 2014

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