I usually scour the percentage gainers and losers to see where the action is in the market. The big action today is in Host America (NASDAQ:CAFE).

Most people know Host America as a food services company. You may have noticed its name at an employee cafeteria, a senior facility, or on a local vending machine. But what sent the stock into 6-bagger territory in less than a month was a July 12 press release revealing that the company's energy-management business was preparing to install its fluorescent lighting system in 10 Wal-Mart (NYSE:WMT) stores.

Momentum players jumped on the stock. From a closing price of $3.12 a share the day before the announcement, the stock more than doubled to close at $6.35 the next day. In five more trading days, the stock reached $16.88 a share! The stock had just hit its 52-week low of $2.69 less than a month before.

As Foolish writer Seth Jayson pointed out a few weeks ago, the company has had only one profitable year -- 1998 -- since its initial public offering at $5. While the press was talking about the Wal-Mart announcement, insiders were selling in earnest. It was mostly upward until the SEC started asking questions on July 20, and on July 22, the stock's trading was suspended -- until today.

Yesterday, the company announced that its agreement with Wal-Mart was oral (there was no written and signed agreement), and that Host America has never even received a list of 10 stores to be surveyed. Yikes. If the class-action filings didn't have enough fuel for a fire before, they certainly do now.

Even worse for current shareholders, the Nasdaq Stock Market Listing Investigations staff has recommended the stock be delisted for "public interest concerns." Simply put, the Nasdaq has had enough chancery and wants this company to go packing.

There are plenty of lessons to be learned here. Even if the Wal-Mart deal was signed, sealed, and delivered, it was only an investigative purchase. Why was the company worth $82.5 million because of that? And then there is the risk of following the momentum stocks. Yes, it is nice to own a stock that produces the top percentage gainer day after day. But where is the justification in orders and profits -- the meat and potatoes that should be fueling any stock that an investor owns?

And here's the question that really has me stumped. Host America has egg on its face -- lots of it. It now has a reputation that is in tatters. Why is the stock still nearly 50% higher than its June low? In this observer's book, this company is damaged goods. Whoever is currently buying this stock at $4 a share must be a big-time optimist.

Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see the Fool's disclosure policy.