Tough crowd. Yesterday, shares of palmOne (NASDAQ:PLMO) fell nearly 11% on extraordinarily high volume -- and on little publicly available news beyond some apparent speculation contained in an A.G. Edwards analyst report. It said mobile phone giant Nokia (NYSE:NOK) might be preparing a handheld device to compete with palmOne's Treo 600 handheld phone, planner, Web interface, camera, electric food dehydrator, and beef jerky maker. (Well, maybe someday.)

I guess I can understand why investors would take note of such "news." (I put "news" in quotes because, as CBS MarketWatch pointed out, there isn't any confirmation from Nokia or other explanation from palmOne about its move yesterday.) The Treo 600 is well-received in its market. In fact, some consider it the top choice among high-end handhelds. Nokia, meanwhile, makes some very well-regarded, high-performance phones, and it could certainly be seen as a threat as it battles for market share.

But is the mere concept that palmOne might face stiffer competition really worth a one-day drop in market value clocked at nearly $120 million? That's a tough sell. Speaking broadly, the handheld sector is already one of the most competitive around. Just ask Sony (NYSE:SNE), which this summer said it would remove its well-liked Clie from the U.S. market. (Clie wasn't a so-called "smart phone" -- Sony's Ericsson (NASDAQ:ERICY) products fit that bill.)

So wherever you look, there's a Research in Motion (NASDAQ:RIMM), Dell (NYSE:DELL), or other player waiting like a predatory bird. Continued competition, particularly in multifunction smart phones, is inevitable, so where's the surprise coming from? That's the rub. It's difficult for investors to know where to look for long-term winners in this case. Consider the huge pop we saw back in June when palmOne released impressive quarterly financial results.

As yesterday illustrates, every move -- or, in this case, word -- is watched by investors with hawklike intensity. That puts investors in a difficult spot.

Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.