How the Pre Crushed Palm Stock

Mar 5th, 2009 | By Jim Nelson | Category: Featured, Investing Strategies

They say you can’t teach an old dog new tricks. Just don’t tell that to the people over at Palm Inc. (PALM: NASDAQ).

The folks at Palm were the brains behind the Palm Pilot — the predecessor to the great wave of Blackberries and iPhones everyone seems to be sporting these days.

Well, they’re back. Unbeknownst to even us, these once Goliaths remained an obscure — yet still public — corporation all these years. Looking at this company’s stock chart certainly tells the story better than I could. Take a look:

We have our doubts about the future of the company that disappointed shareholders for nearly a decade. For starters, the company’s brilliant comeback is stemmed from the release of its new operating system on its iPhone-esque “Pre.” It took more than seven years and the best they could come up with was a phone called “Pre” and an operating system called “Palm OS.”

This new phone, which appears to be a complete rip off of Apple’s iPhone, is supposedly just that good. We certainly didn’t feel the need to rush out and buy one. Even if we did check it out and find that it is perfect, we missed the boat. Investors have already spoken — yes, even in this market.

Since the unveiling in early January, shares of Palm more than doubled. And if you were lucky enough to jump the gun on this one and buy at its December lows, you’d have cashed in more than 510%.

Obviously, investors are falling all over themselves to get a piece of the comeback kid. Well, they were…

Tuesday after the bell, the company produced disappointing revenue guidance due to a decline in demand for its “legacy” products and a later-than-expected shipment date for its Treo Pro — a Blackberry-esque smartphone.

I guess you really can’t teach old dogs new tricks.

This story does show us one major truth about the market — it still loves the comeback kids. Don’t we all? It’s in our nature. Just check out your movie collection. I’m sure you have a few films that fit this bill.

And not all Wall Street comebacks lead to further disappointment. In fact, some of the best investments came after a company hit rock bottom.

Myriad Genetics Inc. (MYGN: NASDAQ) is another good example. After a stellar 1999 and 2000, the company was slated for a half of a decade of suppressed share price. Then, as quickly as it fell, it was swept back up. Investors could have doubled their money over the last nine months on Myriad’s shares.

Not all of these “comeback kids” will go back up. But those that do re-energize a fresh set of shareholders could make you plenty of cash… if you get in early.

Sincerely,
Jim Nelson

March 5, 2009

Jim Nelson

Jim Nelson is the managing editor of Penny Sleuth. He has been playing the stock market since he was 14, always with a preference toward smaller companies. He has honed his stock picking skills at Agora Financial since 2004, effectively combining a growth and value approach. Like Greg Guenthner, Jim also contributes to Penny Stock Fortunes on top of bringing you the Penny Sleuth every weekday.

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