Why Losing Stocks Still Find Buyers

 | Feb 15, 2013 | 1:00 PM EST
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People like losers. They want to believe that J.C. Penney (JCP), which looks, acts and smells like a loser, will be a winner, because they like Ron Johnson from Apple. And the think that Bill "save the world from Herbalife (HLF)" Ackman must know something.

I know retail. It is a tough business. I have known it all my life. A tailspin in retail is almost impossible to recover from. It is like a jet plane whose engines flame out. Sure, it can glide to a landing. But it is best to eject before the plane fireballs.

People like losers. They like Nokia (NOK) and BlackBerry (BBRY). I get that. Nokia is everywhere. It is a huge company. BlackBerry has an impressive customer list. But the game-over smartphones have gotten into duopoly mode: Samsung vs. Apple (AAPL). Where is BlackBerry in that duopoly? But as with Nokia, the carriers want BlackBerry to live, in order to keep the heat on Samsung and Apple. In the meantime, you have to hope that there is a Softbank out there, someone like Softbank that saves Sprint Nextel (S) from its own potential demise.

Of course, everything is at a price. I like BlackBerry at $12 for a trade -- $15 is no-man's land, $17 is a sale. But it is a loser. Sorry.

People like losers: They always want to know about Micron Technology (MU) and Advanced Micro Devices (AMD). I say, here's what you need to know: If Intel (INTC) is a hack stock that no one wants with the best manufacturing and balance sheet in the world, what's the point? Is that investing? That's hoping. Hope should not be part of the equation.

People like losers. They want to buy Groupon (GRPN) and Zynga (ZNGA). I think, like BlackBerry at $12, that makes sense. But after a big move, all you are doing is hoping that others weren't as smart as you were 50% ago. Yes, that is what you are hoping for, because it is not like either company has had a fundamental turn.

What do all of these losers have in common? Pretty simple: It is too late to short them. That's their real commonality. If they go up, it is because some people with too much money on their hands decide that the fundamentals do not matter and that someone else is going to come along and pay more later.

That's not an investing thesis. It is strictly a game of chance. 

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