Linn Energy LLC (LINE), BreitBurn Energy Partners L.P. (BBEP): Don’t Listen to Jim Cramer When It Comes to This Stock

Another even more recent example is the a high profile short sale argument against Herbalife Ltd. (NYSE:HLF) This case also drew in the SEC as another famed short seller had called the company, “the best-managed pyramid scheme in the history of the world.” Because many investors have rules to sell when the SEC is involved, it creates a lot of selling pressure as investors bail, which can make a lot of money for a short seller.

None of this is to say that these short sellers don’t have any valid arguments, but there does appear to be some gamesmanship going on. Knowing full well that at some point the SEC has to look into these accusations, it’s bound to drop the stock when investors run for the hills once an inquiry is disclosed. Investors in both Linn Energy LLC (NASDAQ:LINE) Energy and its affiliate LinnCo LLC (NASDAQ:LNCO) are unfortunately learning that lesson this week.

Smelling blood in the water these same short sellers can continue to pick off similar targets. That’s why I’d go out on a limb here and say that, it wouldn’t surprise to see the SEC launch an inquiry on BreitBurn Energy Partners L.P. (NASDAQ:BBEP). It seemed like as soon as news hit that the SEC was looking into Linn Energy LLC (NASDAQ:LINE) that the same short sellers that had targeted it then dubbed BreitBurn Energy Partners L.P. (NASDAQ:BBEP) as “LINN Energy Junior.” Here again the accusations are scathing as the company’s distribution is being called, “largely a mirage” which makes its units worth single digits. This has knocked the stock down over the past week and the volatility isn’t likely to abate anytime soon.

That’s why I really don’t understand Cramer’s call on LINN. He knows The Street’s “game” better than anyone. He should know that these pubic accusations are going to catch the eye of the SEC. That’s why I don’t agree with his advice to simply sell because of some rule. There is real tangible value in LINN Energy and while it’s quite possible that the SEC might find something it doesn’t like, it won’t find a mirage.

The article Don’t Listen to Jim Cramer When It Comes to This Stock originally appeared on Fool.com is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of Green Mountain Coffee Roasters, Linn Energy, and LinnCo. The Motley Fool recommends BreitBurn Energy Partners and Green Mountain Coffee Roasters and has options on Herbalife.

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