Separating the Bargains From the Busts
How about the disk-drive companies? They are cheap as dirt and are down huge. To which I say, don't even think about it. Those companies have soared because of a supply shortage caused by Thai flooding. Their gross margins have been huge. But drives are commodities. Once they go into equilibrium -- no more shortage -- something that Western Digital(WDC) point-blank says has happened, you can't buy them. Earnings will plummet, and the stocks will stay dangerous for some time.
Declines can be opportunities. However, not all declines are opportunities. I would take advantage of the pullback in Starbucks and Celgene. But the others? Sold to you.