Rebuttal: Why I’m Long BRLC
August 31st, 2007 by 
CA Editors
Rich (rationalinvesting.blogspot.com) sends: I like to buy stocks with high short interests, lower valuations, and ones have recently reported a positive change in the business trends. Syntax-Brillian (BRLC) recently revised their revenue numbers higher for the rest of 2007 due to stronger-than-expected demand. I expect this news to continue, but this is only my opinion. With the stock at $6.48 today, we will see where it is in a few months.
Regarding BRLC’s valuations:
The most followed valuation measurements for stocks are P/E ratio, PEG ratio, and the forward P/E ratio. These may not be the best valuation measurements to find intrinsic value, etc - but they are the most widely-followed. These ratios have a more drastic effect on the share price of the stock. With BRLC sporting a P/E of 13.5, a PEG ratio of roughly 0.47, and a forward P/E of only 7.80, the stock looks to be under-valued (or at least not over-valued). I understand that the “forward P/E” is not based on concrete data due to the estimates involved, but the numbers could also be stronger than anticipated as well as weaker.
In Response to Economic Sensitivity:
Obviously HDTV companies and tech in general will struggle in a prolonged economic downturn (which I believe is not in the cards, but ya never know). However, if Joe Schmo wants to buy an HDTV no matter what the economy is doing, he will likely buy a lower-priced TV that offers great value (like BRLC’s Olevia brand). Therefore, BRLC will likely not suffer as much as the higher-end TV makers in an economic down-turn.
Pertaining to Insider Trading:
If I were an insider in BRLC and purchased shares around $2, I would also want to take some profits (for more than 200%). These guys can’t predict the future, they don’t know where the stock is going over the long-term. They may have a good idea of where the company is headed (but not perfectly as external factors can never be fully determined), but no one knows where the price of the stock is headed. I’ve seen stocks post great earnings and plummet the next day, and vice-versa. Insider selling in BRLC should not be assumed to be a negative aspect of the stock solely based on the recent sales.
This article is a rebuttal to “Four Reasons You Shouldn’t Buy BRLC”.
You can view Rich’s other holdings on his blog, Rational Investing.
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August 31st, 2007 at 2:25 am
[...] This article was inspired by Rich at Rational Investing’s purchase of BRLC. You should also read his rebuttal. [...]
August 31st, 2007 at 9:23 am
BRLC is one of those cheap msg. board favorites that has the nice addition of high volume. It’s a fun stock to trade because of the liquidity and volatility. I got in a few days after the news broke that Soros’s fund was an investor, @5.4 and was able to sell it the next week (last week) for a 25% gain, with the stock up around 5%+ a day. I’ve never had a stock do that before.
That said, the previous analysis on the stock is more on the mark. The company keeps selling off shares to fund itself (although the recent sale was a strategic alliance), and selling discount TVs, even LCD TVs, is not a good business, especially with Sony recently entering the market. A fun stock to trade, but I wouldn’t bet on it for the long term. I’d wait to see earnings on 9/11 or at least see if it can get over the resistance above 7.
September 10th, 2007 at 6:37 pm
Lcd competitors reported strong Q2 higher than wall street estimated. BRLC won’t be the exception, BRLC will break @ $8 based on undervalued stock combined with strong EPS. I think buying before the released is secured, otherwise you will miss this chance. If high target is 15, BRLC is still below 100%. This is a gift discount
September 14th, 2007 at 10:23 am
[...] weeks back I had a debate with Rich about why he was long Syntax-Brillian (BRLC). Very simply, I didn’t think the stock was worth buying because there was a high degree of [...]