Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of China cleantech company RINO International
So what: The big news recently for RINO was the harsh light cast on the company by small-fry research firm Muddy Waters. As part of a "strong sell" recommendation, Muddy Waters alleged wide-ranging fraud at the company, most notably in overstating revenue and its competitive position in the industry. Today, pessimists dug in their heels as the company reported disappointing third-quarter results and cut its outlook. On top of that, Canaccord Genuity lent some credence to Muddy Waters' allegations in a research report, and cut RINO's shares to "sell."
Now what: In the courts, Americans are always presumed innocent until proven guilty. In the stock market, though, by the time guilt is proved, the fat lady has often already finished singing for investors. In RINO's case, investors are obviously concerned about getting caught in front of a fraudulent freight train. The last chapter of this saga hasn't yet been written, and if it turns out that RINO is on the up-and-up, there could be hell to pay for Muddy Waters -- not to mention big gains for investors who stay in the game. At this point, though, any investor eyeing the stock should realize that this has become a highly speculative bet.
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