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Highflying Stocks Have Been Grounded

Last week we gave you 12 stocks that seemed to defy gravity. That number is now six.

And then there were six.

Last week we

showcased 12 stocks whose prices were defying gravity despite the brutality in the stock market. These stocks boasted trailing price-to-earnings ratios of 200 or more, price-to-sales ratios of 40 or more, and market caps of $1 billion or more.

Today, using that same criteria, only six of those stocks remain. And no new ones turned up.

The stocks on the original list have seen their valuations hammered. In most cases stock prices have been cut by 25% or more.

When our first story appeared, a hedge fund manager had this to say about our list: "There is still a ton of excess out there and this list is a representation of that. That doesn't mean these are bad companies; Brocade is a great company," he said. "But now that reality has begun to set in, you get this multiple compression."

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Today, that manager thinks the excess is getting washed out. "It is overdone. Everything has come down." (The manager holds no positions in any of the stocks in the original dozen.)

As an example of a damaged quality company, he points to



, which has fallen from $220 to $150 in about 10 days. Yet, last night Brocade

reported fourth-quarter earnings and revenue projections ahead of analysts' expectations. "Brocade has clearly done a great job of growing revenues and earnings."

So is this hedgie calling a bottom? "No one can call a bottom," he says. But he adds: "At some point people are going to start taking these back up; People are going to come back to the market. There are some real good companies out there -- and the strong players will survive."