Back in May, we told you to beware of analysts who recommend stocks based on their nominal value (Cheap Stocks Under 10$!!), as opposed to more traditional valuations, like...oh I don't know, earnings, growth, book value, old fashioned stuff like that, writes The Stalwart. At the time we focused on a Forbes Radio talking-head who thought that Telecom-player UTStarcom (NASD: UTSI) was poised to profit from an explosion in the Chinese cell-phone market. One problem, UTStarcom doesn't really make it's money from cell-phones in China.
Having had some (unfortunate) history with the company, it was pretty easy to call this analyst out on his nonsense. If you'd listened to him then, you'd be down over 20% today, on yet another revenue warning and new SEC investigation.
The company has been nothing but a disappointment and a trap for some time. Because it appears to be in a hot spot, mobile+China, green investors keep getting excited about this, only to lose their shirts the next time some bad news is announced. A few months later, all is forgotten as the next round of suckers steps in to buy a seemingly cheap stock. I'm doubtful this will be the last time investors get taken buying UTSI.
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