Former High-Flyer Fitbit Represents Buying Ugly at Its Finest

Historically, I've avoided buying fad stocks, primarily because they rarely conform to any of my value biases, as limiting as those may be to many investors. Fad stocks typically trade at high multiples (of everything), and are driven by investor frenzy and momentum, and not fundamentals. Admittedly, plenty of investors have made a great deal of money in these situations despite my reservations, but plenty have taken their lumps as well. It's difficult enough to accurately determine what is and isn't a fad, not to mention to accurately call when the luster will wear off and valuations come back to reality.

However, I sometimes have become interested in former fad stocks once the dust settles and the momentum crowd has moved on. Such is the case with Fitbit (FIT) , a former high-flyer that has fallen back to earth. Perhaps that's being generous; shares are down nearly 90% from the stock's all-time high, 70% over the past year and 28% year to date. Fitbit has been putting up worse-than-expected quarterly results, and revenue and earnings expectations have ratcheted down considerably along with management guidance....310 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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