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Technology Stocks : Adaptec (ADPT) -- Ignore unavailable to you. Want to Upgrade?

To: Jim Switz who wrote (2759)	6/23/1998 3:27:00 PM
From: The Philosopher	Read Replies (1) \| Respond to of 5944

A disquieting analysis by Michael Brush: could explain the slow recovery of Adaptec. Or maybe Adaptec fits the criteria of the faster recovering stocks coming up in part 2 of th report When good stocks go bad Stocks that sell off on bad earnings news may seem like bargains. But be careful. Chances are, they will take longer than you think to recover. First in a two-part report By Michael Brush moneydaily.com As we move into the peak earnings confession and reporting season over the next six weeks, investors will be facing a common temptation. This is the time when the management behind many a high flying momentum stock will fess up to having a weak quarter, causing shares in their companies to lose as much as half their value in the blink of an eye. Surely the panic selling that occurs as the momentum investors flee a stock must create a good buying opportunity. After all, the same management that turned in the great performance is still in place. Just stick out a rough quarter or two at most, and these stocks will be back up near where they were in no time, right? Probably not. Chances are, momentum stocks that tank because they preannounce a shortfall or report lower-than-expected earnings will underperform for at least a year, according to a study by Claudia Mott, a small-cap stock analyst at Prudential Securities. Trolling the momentum trash, as she puts it, simply does not work that well. "Some investors think: 'We missed the stock the first time around, so this is a great buying opportunity'," explains Mott. "Well, here is proof that it is not. When it comes to these momentum names, these blowups don't turn out to be buying opportunities." Portfolio managers who use momentum strategies, which try to come up with stocks that have things like rapidly expanding profit margins or steadily improving earnings forecasts, agree with Mott's findings. Once these stocks get hit, they bounce along the bottom for some time," says Louis Navellier, of Navellier & Associates. "The big-cap stocks can bounce back a lot quicker. But the small ones can take as much as two years to recover." In her study, Mott screened for momentum stocks that had moved up quickly and then got hammered - either because their earnings estimates were revised downward, or they reported weaker than expected earnings. Then she looked at how long it took them to recover. The results: overall, fewer than half outperformed their benchmark indexes after a year. The least likely to bounce back were mid-cap stocks that got hit because of downward earnings revisions. Only 21% to 26% of these stocks outperformed their benchmark, the S&P MidCap Index, after a year. The ones that seem likely to do the best are small-cap stocks that sank because they missed earnings estimates. After a year, between 40% and 43% of them outperformed their benchmark, the Russell 2000. "Some people think that because more money is being invested these days using momentum strategies, stocks deserve a rebound if they get extremely beaten up when they are sold haphazardly by momentum players," says Mott. "But just because more money moves out when momentum players pull the trigger, it doesn't mean the performance after a negative surprise is any better." Still, not all momentum stocks that thank on bad earnings news will be in the penalty box for the long haul. In Tuesday's Money Daily, we discuss how to identify those that have a better chance of bouncing back quickly.

To: Jim Switz who wrote (2759)	6/23/1998 4:06:00 PM
From: Johnathan C. Doe	Respond to of 5944

I ending up buying a ton of PAIR at 16 and under and am very happy!