It's tough to bet against the crowd, just like it's tough to catch a falling knife, or tough to let go of a rocket that's already in flight. Sometimes though, the right thing to do is the tough thing to do. The same is true in trading, which brings Verisign, Inc. (NASDAQ:VRSN), LodgeNet Interactive Corp. (NASDAQ:LNET), and TASER International, Inc. (NASDAQ:TASR) into focus today. All three stocks have recently made extreme moves, and while the crowd may be feeling one way about them right now, this may be a time to be in the minority.
Take TASER International, Inc. for instance. Shares are up 21% today following last quarter's earnings beat. It's exciting to be sure, but this is a case where the market may be bidding up TASR without actually looking at the numbers - as good as they superficially are - behind the numbers.
Though TASR topped estimates, the stock's still trading at 36.0 times forward-looking earnings. Even if the security and defense-goods company continues to beat estimates through 2013, there's still not much room left for upside. And if you go further back into the stock's history, you can see that TASER International doesn't handle big runups well. The things investors are saying and thinking now about the stock were the same things they were saying and thinking about the stock back in November of last year after that big rally. In retrospect though, all that optimism was a perfect reason to bet against the stock.
At the other end of the spectrum is Verisign, Inc. The internet registrar has watched its stock tumble 19% on Friday, and the day isn't even over yet. The reason VRSN is in the gutter isn't earnings-based; the company is being scrutinized by the Commerce Department, which is allegedly concerned about the organization's pricing policies (and the contract the company owns giving it the right to manage website registrations may not be renewed by the government). Profits were actually up 30% for the quarter.
The knee-jerk response is understandable. If VRSN doesn't act as the go-between to manage domain registrations, then a huge chunk of its revenue is in jeopardy. This is apt to be far more bark than bite from the government, however. And with that being the case, Verisign is actually a bargain now that it's priced at 17.0 times its projected 2013 income. Or at the very least, the stock's poised for a dead-cat bounce following today's implosion. The stock's already formed a doji bar, which hints at a pivot.
Last but not least, LodgeNet Interactive Corp. may have been unwanted through August, in that the stock's price plunged from $3.83 in April to a low of $0.30 two months ago. But, LNET is working on its second bullish thrust since then, both of which have been high-volume efforts. Given the depth of the buy-in, it's tough to say the tide isn't turning here.
LNET is one of the (few) companies that provides internet connectivity services for guests at hotels. The corporation was largely written off by the market a few months ago, but some new marketing efforts made this year are getting more traction for LodgeNet Interactive than anybody would have expected. The company's still losing money, but there's a light at the end of the tunnel. The whole operation just needs to be scaled up some in order to bring revenue closer to expenses. It's worth a swing as it is right now though... badly beaten down since April, but starting to perk up.