Alan Brochstein

20 'Babies with the Bathwater' Stocks for This Week

Perhaps the new environment we are in should lead you to question the validity of your model regarding "strong" fundamentals. Just a question, really, since I don't know how your model works to characterize that attribute. RNT shows up on your list, and I have done proprietary work on that one to suggest that it is an "aids and abetts" consumption of things by people who can't afford them. It would seem that while this worked and could produce "earnings stability" and "growth" in the past, one would have to be very skeptical that it would continue to work. Similarly, I know SRDX very well. I am not sure how you characterize their fundamentals, but their "growth" has been driven by a large deal with MRK that has now been cancelled. In the most recent quarter, though, there was a big boost (at least to GAAP earnings) due to that termination. Rather than debate the details of your model, suffice it to say that these are times when sticking to what has worked in the past is not likely to prove very helpful in my opinion. I have had to totally shift my focus (away from sustainable growth at a reasonable valuation combined with good technicals) to a deeper value strategy focused on only the very best balance sheets. In the past, I liked to buy good charts, now I have to sell them and instead focus on buying oversold stocks that have overreacted to near-term news.