Check out my most recent article on Seeking Alpha giving an updated rationale behind our fund’s Short position in Green Mountain:
My Notes From The Green Mountain Class Action Lawsuit
by Yaron Ron Reuven
Anyone who has followed Green Mountain (GMCR), turned on CNBC at least once in the last couple of years, or simply browsed yahoo finance, knows that GMCR and its management have been party to a Class Action Lawsuit that has been nastier than most. What’s more interesting is that most people, including shareholders, have not actually read the lawsuit complaint page by page. Having a short position in the stock, which I discussed in my first SA article last month, we spend each waking hour searching the world for more information about each of our investments. read more »
Green Mountain Coffee Roasters (
The May 6th, 2010 Flash Crash was explained with much speculation about an error trade along with numerous other conspiracy theories. Unfulfilling would be an understatement. Our view of the event was that it was the culmination of the many changes that have taken place to alter the dynamics of the market. The removal of the Up-Tick Rule, elimination of fractional prices, lack of regulation and oversight in the derivatives market, massive growth of ETF’s, Internet overload, NYSE floor conversion to electronic trading, and the most critical, high frequency trading, have all contributed to the structural change. Even though the new Dodd-Frank Bill is expected to hammer more regulation into the financial sector, it seems that politicians are spending most of their energy and resources fixing everything that’s not broken, while pieces of sharp glass remain on the floor.
Electronic trading has grown beyond anyone’s expectations and even the market’s ability to handle it. High frequency trading has been a part of the electronic trading evolution that has taken the market by surprise. Nearly 80% (and possibly more) of all trading is executed electronically, up from being less than a quarter of the market’s capacity during the last decade. These HFT firms use algorithm calculations in order to have the computer make the decisions a human being is too slow to make. Part of the flaw of algorithms being used in HFT is that it is possible, and even likely, for multiple algorithms to have the same “trigger point” and create a domino effect that a human can avoid by using their better judgment. This common denominator is what we believe to be the main cause of the Flash Crash, and will inevitably lead to more crashes and spikes in the future. Although our Fund intends to use periodic hedges, our most important hedge is to remain long-term fundamental investors. Remaining disciplined with long- term investments is really the only play that I see in this market, as the short-term swings (however severe) would not steer the true value of our companies, but rather only the short-term price of our stocks. My experience has been that fundamental values of a company would eventually outweigh the temporary perception being shown by the stock price.