Earnings season is always a difficult time to invest, but this one seems to have been harder than most.

Companies that have hit earnings home runs have gotten punished, while the ones that deserve to strike out have seen their shares rally.

Take banks, for example. Until recently, the industry has reported lousy results yet companies like Fannie Mae (FNM) and Freddie Mac (FRE) sit back and watch their shares soar (see also, “Wachovia’s Steel Resolve“).

And sometimes a good company’s stock gets so beaten up it simply defies logic. Broadcom (BRCM) knocked one out of the park this past quarter, but the chip maker’s shares sank on margin concerns. Apparently, it doesn’t matter that the company issued a revenue forecast that was higher than analyst estimates, not to mention that BRCM has a balance sheet that shows about $1.9 billion in cash and short-term investments with absolutely no debt.

I know it’s hard though to fault managers who sell stocks that have been doing well. After all, who can blame them? I certainly can’t. In this market, performance is the name of the game and it’s no sin to get out while the getting is good.

So what gives?

It’s as if certain companies “pay in advance” for their performance both the good and the bad. In Broadcom’s case, this seems to ring true.

One-Two Punch

BRCM reported better-than-expected sales across all of its business segments, and it has top-tier customers in each of its businesses, like Cisco (CSCO), Hewlett-Packard (HPQ) and Apple (AAPL) just to name a few (see also, “Apple Ups the Ante With the 3G Phone”).

Broadcom is ramping up its R&D spending after a period of easing up on spending; hence the lower margins which will now go back to “typical” levels – about 49% to 51%, but the R&D money will be money well spent in my opinion.

BRCM shares trade for about 14 times fiscal ’09 earnings estimates. If you can find a stock like BRCM that has endured a knee-jerk reaction, don’t be afraid to dip your toe in the water. Average down if the stock goes lower, then sit back and be patient.

I guess life just isn’t fair…not in this market anyway.

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