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For all intensive purposes you can do two things with a stock: trade or invest.
A trade is a short-term affair (days to weeks), while an investment is a long-term option (months to years).
The idea it to determine which option is best for the stock at hand.
Because trades are based on short-term actions, the long-term outlook of a company is basically useless. So it doesn’t matter if the company is a dump. If there is a brief glimmer of positive news or bullish technicals, virtually any stock is a viable trade at some point.
The same can’t be said for an investment. Venture capitalist don’t invest in a company and expect a return in just a couple of days. They are betting the long-term outlook of the company will ultimately bring back some return on investment.
Investors are not bothered by any short-term negativity because they are focused on the then and not now.
We can see a great example of this in Research in Motion (RIMM). About 6 months back, the long-term outlook on RIM was not great. In fact, if you bought shares back then, you would still be in the negative today.
That being said, as much as a I hate RIM, that does not prevent me from executing trades of the stock throughout this same time period.
The market is a crazy place, and stocks move up and down all the time. Regardless of if you think a company is a dump in the long-term, there are always awesome trade-able opportunities in the short.