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2 Stocks to Avoid on the Dead Cat Bounce

Stocks in this article: JCPRIMM

Research in Motion (RIMM). While RIMM continued to set new 52-week lows last week, it has been the king of dead cat bounces for more than a year. I fully expect another head fake or two before RIMM enters single-digit territory. Generally, spikes in RIMM happen for one of two reasons: M&A hopes and rumors or yelps that it's a value play.

RIMM permabulls and so-called "value investors" have trotted out the same old tired arguments for months. They crunch some numbers, come to the conclusion that the Toronto Maple Leafs season tickets RIM owns, plus the company's patents and real estate, make the stock worth (insert meaningless number here). That triggers buy-out talk. If you're not trading these moves, you're a sucker. RIMM always ends up falling further after these ill-advised increases.

Unlike JCP, RIM is actually part of a thriving industry. It's just not making the right moves to have any chance whatsoever at competing effectively within it. Its brand is just about dead. And the new boss, same as the old boss management refuses to make wholesale change.

Until you see evidence of a seismic attitude shift at the company -- as in, it brings in fresh, competent and innovative blood from the outside -- there's just no good reason to get long RIMM.

>>To see these stocks in action, visit the 2 Stocks to Avoid portfolio on Stockpickr.

At the time of publication, the author held no positions in any of the stocks mentioned in this article.

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