Buying the Pukes

Sep 12, 2012
J. Webster
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There’s a trend these days in stocks selling off huge only to rebound in a matter of days if not minutes. It’s the old buy the dips. Better yet, it’s buy the pukes because once the stock throws up it starts to feel better very quickly. It’s as if all the bad stuff gets out of their system and the stock can move forward – onward and upwards. The “weak hands” are out and the believers buy back in.

Take Nike (NKE) for example. The stock sold off hard on worries about a slow down in Europe, only to bounce back and then above where it sold off in a few weeks. And it seems like Nike isn’t getting enough credit for the data aspects of it’s new smart shoes and the Nike FuelBand. Plus, Nike will put data collecting sensors on golf clubs.

And then there’s Brown Shoe Company, (BWS) the global footwear retailer puked into the toilet after reporting a loss and shot down over 10%, only to rebound above where it puked in less than two weeks. As Philip Etienne perfectly stated, buy the puke in BWS. The story seems to be that the company is only going to keep growing and expanding, as it recently purchased the Sam & Libby brand.

Another exmaple is Tibco Software, (TIBX) which sold off hard, over 10%, when it was downgraded by ThinkEquity as said there were “lingering organizational issues at the company and 10% headcount reduction planned in U.S.”. This turned out to be false as the company said there were no reductions planned. The stock is now back to near where it sold off.

Finally, look at the classic always buy the dips or pukes stock everyone must own these days, Apple, (AAPL). After it lowered guidance the stock was slammed, now it’s well above and beyond where it sold off. Look at the canyons in Apple’s stock chart and see how quickly it rebounds. Apple right now is in a downdraft as everyone waits for the iPhone 5 release. Will this again turnout to be a buy the dips case and Apple will soar into the $700 range?

Sometimes it’s painful to go in and clean up the puke, it’s quite smelly, but somebody has to and in the stock market, at least with these stocks above, you’ve been generously rewarded when you buy the pukes.

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