Roger Nusbaum submits: A concept I write about a lot is understanding what a stock you own or are thinking about buying is capable of doing, price-wise, in the face of good new or bad news. I think the best way to do this is by watching a stock for awhile. Yes, you can look back at a chart for this, but I think you get a better feel by seeing reactions in real time.
Two years ago I wrote an article for Motley Fool about a stock called Pozen (NASDAQ:POZN) which is a biotech stock working on a drug for migraine headaches. While I am not sure if Pozen is a one drug company or not the market perceives that it is.
The catalyst for that article was bad FDA news that took the name down 40%. That 40% hit was not the first time that the stock had been crushed in a similar manner and the stock got cut in half Friday on bad FDA news.
Regardless of anything else having to do with this stock, the actual company or its drug, it is very capable of being crushed on bad news, more so than a lot of other stocks. That it happens to this one stock every couple of years makes me question the merits of owning it, but I do not know enough to say for sure.
I do know enough about its trading to stay away.