Do stocks that decline 90% in value present a buying opportunity?

A buddy recently sent an email to Cameron Gilbert and myself, and he suggested it might be interesting to look at whether stocks that decline 90% in value could (in combination with other criteria) present an interesting buying opportunity.

The first step to analyzing this question is to translate it into code. How do we define “stocks that decline 90% in value”? We want to transform it into a set of local maxima, and then look for stocks that trade at <90% of the value of the most recent local maximum.

My adj_eod database goes from 1/15 to 4/16. I had to exclude a couple picks due to data errors, ‘QPAC’,’LOCM’, and ‘CBX’. But the average return buying from the first opportunity and then selling in 4/16, was -27%. Maybe an interesting short selling opportunity.