In November, after Crocs’ (CROX) last earnings announcement and subsequent large gap down, I wrote that CROX was essentially a broken version of a dumb money momentum play, and those things almost invariably end poorly. On that day, the stock traded above $50, a third off its high of $75.

Today we had another earnings announcement from Crocs, and another reaction that probably made you feel sick if you’re long. The net result is that it looks like the stock will have been cut in half since the day after the last earnings announcement… this for one of the fastest growing companies in the market, not that growth matters when people are paying obscene multiples for it. Going back to the point I made when I first talked about Crocs: DCF isn’t dead - because common sense isn’t either, and in the end DCF is just a fancy way to quantify and display common sense related to investing.

What to watch closely from here? No, not the inventory that is being given so much credit/blame for the stock being at $28 after hours - watch and see how many people stand up tomorrow and say something along the lines of “time to buy CROX.” I don’t make guarantees, but the odds are if there are plenty of people willing to speculate that the bottom is in, it isn’t. Consider this article, which declared the time to buy CROX was right after the last earnings. This phenomenon was particularly prevalent in Apple (AAPL), noted here, here, and here, and that bounce didn’t materialize either. Coincidence?

Is yours truly immune from doing this? No - but I’ve certainly learned something in the process, and that is when people are willing to speculate immediately following a big down move, it usually means the bottom isn’t in. Read that sentence again, and look to see how many voices pipe up tomorrow morning saying CROX is a buy. (Note: This is as of 10 pm Tuesday, I’ll update this space tomorrow if I see anything noticeable.)

From my end, I don’t really know what you do with CROX if you’re holding it, because you shouldn’t have been in the first place. You have a gimmicky fad footwear product that is the foundation - apologies to foundations everywhere - of a $2.5 billion company, and now people are getting worried about whether or not they can continue moving inventory of their core product. Why not go with something like J. Crew (JCG), which is also a $2.5 billion company, and doesn’t sell things that people universally regard as ugly?

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A postscript: I have zero fashion sense, but I do have better than 20/15 vision. If the following image was the only investment data you had, what capital allocation decision would you make?