Go Against the Herd

Nobody likes to see good companies in trouble. No company wants troubles in its financial reporting, and most certainly, no company wants an SEC investigation about the very same.

Yet, this is precisely what is happening to an innovative mid-cap company called Cognos Inc. (NASDAQ/COGN).

Cognos is in the software business, helping companies with business intelligence (BI) and corporate performance management (CPM). If you are a company and you need budgeting software, event management solutions, reporting, integration, you name it– this company can design business software that will help out.

Since January 2005, the company’s been experiencing a slow period and the stock’s been stuck in a trading range. To cap it all off, the SEC just announced that it is investigating the company about how it’s been allocating some of its revenues.

Not surprisingly, the stock recently tanked. So, the company’s revenues have been falling, its accounting practices are under investigation and the stock is in the doldrums. What does this spell for the individual investor–one big opportunity!

The opportunity isn’t right now. Time and time again, I’ve seen companies experience tough times and the stock goes in the dumper. Throw in some more bad news and the stock really isn’t wanted by anyone. Then, business gets better, but the stock doesn’t do anything because no one wants to touch it. Finally, the stock takes off on only modest good news because it was so undesirable before that there are no more sellers in the marketplace.

This very well could happen to Cognos. It is still early in the company’s unfortunate stretch of bad news, but I think it’s worth following the stock from now on.

It really does take courage to go against the herd in the stock market. When a stock is down, no one wants to consider buying it. Yet, this is precisely when you can make a killing in the marketplace.

Put Cognos on your radar screen. The opportunity doesn’t exist just yet, but it may in the not-too-distant future.