RF Micro Devices Inc. (NASDAQ: RFMD) was the daily deal for investors on Friday if you believe that stocks which drop about 20% are suddenly a bargain after they lower guidance. Experience shows that despite a new 52-week low that it would probably take a sudden and huge market rally to help drive interest back into the shares. Companies which have huge negative reactions due to an earnings or revenue warning tend to be in the penalty box not for just one day.
Even after a 1.1%drop today to $4.48, shares traded as low as $4.41 and under the $4.45 low of the year from Friday. Deriving a “value stock” should never just be because a stock goes on sale. That is when traders and speculators find out the difference between bottom fishing and bottom sniffing. One is highly rewarding, and the other is not but we’ll leave it up to you to decide which is which and which pertains here.
RF Micro traded over 33 million shares on Friday versus an average of more than 7 million shares in the last 90 days. With only about two hours until the close of the market the stock is down marginally and trading volume is only about 4.4 million shares.
A lack of volume today tells you that very few are trusting a “one and done” bad quarter as the most logical answer. That does not mean that RF Micro cannot come back in favor. History is just against it.
The old saying goes, “Stocks hitting new 52-week lows tend to keep hitting new 52-week lows.” Eventually it usually changes.
JON C. OGG