When Is Bad News Bad?

When is the bad news out? That's what we are battling in tech right now. Take Sanmina (SANM:Nasdaq - news - boards). We like this company very much. It has been hit for days on worries stemming from SCI's (SCI:NYSE - news - boards) blow-up. This morning it took another hit in a Heard on the Street column in the Wall Street Journal.

At $110, where this stock was last week, Sanmina is too high. But isn't $90 too low? We think so. We have been adding to the position all morning.

Does that mean Sanmina is out of the woods? Does it mean that things got too low?

Nah, it just means that Sanmina is probably, to us, better valued somewhere north of where it is. A 20-point decline virtually overnight has a way of making something that was expensive, cheaper. And worth buying.

The tug of war here is how much negativity is already in stocks. When it comes to Intel (INTC:Nasdaq - news - boards), to Microsoft (MSFT:Nasdaq - news - boards), and now to Sanmina, we think too much negativity is now discounted. There is too much pessimism. But it is all case by case. We can't make a sweeping generalization about all stocks. One by one we analyze. We can't afford to decide that all of tech has bottomed. Some simply haven't come down as hard as others.

When I worked with my wife, she used to use the one-third rule in corrections. When you think a correction has run its course, probably a third of the stocks have bottomed. Another third are bottoming. And another third aren't there yet. That's pretty much where we think we are in tech right now.

Yes, the declines have been that severe.

Random musings: Tops and more tops! Come to San Francisco next week and hear about some tops you didn't know about that could help save you a ton of dough.

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James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Sanmina, Intel, Microsoft. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to send comments on his column to James J. Cramer .