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Entropic Communications, Inc. Message Board

  • hageneriksson hageneriksson Oct 25, 2012 2:01 PM Flag

    Stock is still exhibiting severe weakness at midday

    I already noted the reasons why investors are pulling the rip cord on ENTR today but the severe weakness the stock is showing today on 3x average volume is exceeding even my expectations.

    Today could prove as a good lesson for investors but most people who are long the stock on this board have obviously become pigheaded or just wearing blinders.

    Here are some essentials for investors:

    investing in growth stocks means you are exposed to high betas

    a growth stock needs to show growth

    the smart money is always in a hurry and wants to see results in the short term - if one company doesn't live up to expectations there are dozens of others who do - accordingly the smart money exits the stock and won't come back for some time.

    uncertainty is almost always killing a stock - with management pointing to market share losses, lower gross margins and lumpiness in the business investors really can't be happy (except for some guys on this board). While these news should not come as a big surprise they are certainly no argument for buying the stock either.


    don't move below a given status quo. Apart from the dismal guidance following the Trident business ENTR in most cases delivered solid upsides to revenue estimates and guided higher almost wach quarter. This time they managed just a very slight beat and subsequently lowered forward guidance which is a very rare event. Slower business is often viewed as a company specific issue and most likely the start for even bigger disappointments going forward, so investors tend to move to the sidelines and wait for a pickup in the business.


    Don't fell in love with a stock. Just because the technology looks good and valuation seems to be a bargain doesn't mean the stock can't get much cheaper. Always limit your losses.


    Don't blame it on the usual suspects - the stock is down so much because there are a lot more sellers than buyers today caused by a mediocre earnings report and a weaker than expected outlook. Forget about market maker or hedge fonds conspiracies - these are the type of excuses uneducated investors always love to cling to when things are starting to turn against them.

    Bottom line:

    some lumpiness in the business doesn't mean the company will be doomed but of course this should warrant some caution going forward. Entropic has solid fundamentals and a rather cheap valuation so unless things get worse the stock shouldn't slide much lower. As a long term investor I wouldn't sell at this point. If the stock continues its slide I would start to add to positions as the underlying fundamentals support a stock price of at least $5.
    But if you are looking for short term profits you should probably take the loss and move on - there are still dozens of growth companies delivering above expectations. The stock will be dead money for at least three months but I suspect this timeframe to be extended on the next quarters conference call.

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