The turmoil in the markets makes it too easy to justify selling any stock these days. Yet, while panic never helps investors, it's still a good idea to play devil's advocate with investments.
Consider genetic diagnostics firm Sequenom (Nasdaq: SQNM ) . Though its novel genetic test hold tremendous promise, you'll find more than a few of the 662 Motley Fool CAPS members weighing in on the company offer reasons to be bearish today.
Here at the Motley Fool, we like to consider both the good and bad sides of an investment, so in this article, so I'm highlighting three of the main bearish arguments on Sequenom today. Be sure to read the bullish case, as well, and then weigh in with your own comments below, or rate Sequenom in CAPS.
1. Legal mess
Due to ongoing litigation, investigations and legal expenses regarding the mishandling of clinical data for its prized prenatal Down syndrome test, Sequenom recently said it won't be offering any guidance for the next couple of quarters. That move leaves investors to take a shot in the dark about where its financials are headed. While companies like Mahindra Satyam (NYSE: SAY ) have survived legal debacles, some investors see too much uncertainty surrounding Sequenom's situation.
2. Short cash string
Unlike larger peers such as Gilead Sciences (Nasdaq: GILD ) and Bristol-Myers Squibb (NYSE: BMY ) that generate billions in free cash flow, Sequenom has a history of recurring losses and expects to continue burning cash for the foreseeable future. In its third-quarter earnings report, the company stated its concerns about having enough money to make it through 2010 if it maintained the same spending levels, which has some investors not sticking around to find out whether the company will make it.
3. It's a gamble
Even many of the CAPS members who think that Sequenom will outperform the market recognize that their pick is a gamble more than an investment. Sequenom's stock has been largely driven by potential, similar to other biotech players Onyx Pharmaceuticals (Nasdaq: ONXX ) , Exelixis (Nasdaq: EXEL ) , and Seattle Genetics (Nasdaq: SGEN ) . And some investors don't have the stomach to hold on to the large swings in share price.