Bear Market Lesson #1: any argument that a stock will bottom based solely on how far it’s already fallen tends to be bunk.

See also: watching Bear Stearns (BSC) fall, and fall, and fall some more before being taken under by JPMorgan (JPM). Even those very late to the party getting short could have easily made 70%+. And the same could be said about Crocs (CROX). Doing a brief review of my posting history on the stock, you can more or less set a watch by the formula - Crocs reports, cuts guidance, stock falls. Speculators get in looking for a bottom. Bottom does not materialize. Crocs reports, cuts, falls. Repeat.

So what happened this afternoon when CROX issued new guidance? The company wasn’t even close to sales estimates, and cut EPS guidance to around $0.05 after previously giving a range around $0.45 - which the company blamed on a tough economy. For the full fiscal year, the company actually expects sales to come in lower than the prior period; it seems like it was only last fall when this company was already crowned as the next Nike (NKE), and now they can barely turn a profit. The highlight of today’s release, if you will, was that Crocs is succeeding in decreasing inventories, as well as receivables. If that isn’t going to get the People’s Momentum Daily crowd frothing at their ETrade stations, I don’t know what will.

Shares ended after-hours trading down another 45%, to under the $5 mark. Crocs now has a market cap of approximately $410 million, which means it is getting close to the most recently reported net tangible assets - though I’d still say no margin of safety exists, because a discount should be applied to several of the asset categories to account for lower liquidation value.

After doing a review of Crocs’ furious insider selling during 2007, I’ve come to the secondary conclusion (or suggestion) that management shelve plans for creating further visually unappealing footwear to focus on market timing. While my original scan from Yahoo Finance data suggested that insiders grossed over $2.1 billion selling stock in 2007, it now seems like Yahoo likes to add an extra zero and $210 million seems like a more accurate number. This is nonetheless impressive given that amount is roughly half the current market value of the entire company now. The only people who might have made out anywhere nearly as good on CROX is the I-Bankers who sold it; I imagine they still chuckle every time they see the stock quote flash on the screen.

I’m instituting a modified going-concern rule that applies to CROX from henceforth: unless they can turn things around and prove they aren’t a fad - to the point where I believe there is more value from ongoing operations than in shutting the company down and liquidating - I’m not going to say anything else about them.

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