Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: Jon408 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121  
Subject: Recent Drop Date: 1/24/2003 12:19 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
On 1/15/03, Immucore (BLUD), dropped from a high of $25.91 to a low of $20.10, and closed at $20.21... a 22% drop.

A day later, Immucore held a press conference to explain the drop, and to assure investors. You may still be able to hear that conference call here: 888-562-2796

You can view the BLUD chart here: http://quote.fool.com/Chart/chart.asp?currticker=blud&symbols=blud

From my notes:
The CEO and CFO affirmed that profits are firm. They cited that a competitor (not named), was downgraded by CJS Securities, and that CJS Securities also downgraded BLUD at the same time - but that the issues effecting Immucore's competitor were not applicable to Immucore.

Management said they were confident with guidance of 38% growth. At the time that this happened, the CEO diversified his portfolio, which was 98% in BLUD. Bad timing.

CJS Securities downgraded BLUD from Buy to Hold for 2 reasons: BLUD had hit their $25 target price, and they were concerned about their quality of earnings, wishing that BLUD had described profits better.

There was a lot of discussion about "inventory" issues. Basically, BLUD has, from time to time, made changes to their Balance Sheet due to changes in the quality of the materials they process. It was explained that given the nature of their business, such changes were ordinary and normal.

Comments
A very similar thing happened to CACI (CAI) on April 23, 2002. The stock opened at 35.21, and dropped to a low of $30.80 after announcing great growth and earnings. The problem? Even though CACI was announcing tremendous growth and profitability (which has been re-confirmed with their announcement today, by the way), one (or more) analysts had not done their homework; CACI had held a secondary stock offering, increasing the number of shares... and when the analysts (not paying attention), figured the EPS, they came up "short" - and downgraded the company to a Hold or Sell. See the the CAI chart here:
http://quote.fool.com/Chart/chart.asp?currticker=cai&symbols=cai

Something similar happened to H&R Block (HRB) on 11/7/02, when the stock dropped about 16% before closing with a 14% loss on the day at $35.35. In HRB's case the story was true, but over-simplified. As it turned out, HRB had not informed their clients correctly, and a class-action lawsuit was brought, prompting a number of web-based stories on this highly trusted company. See the HRB chart here:
http://quote.fool.com/Chart/chart.asp?currticker=hrb&symbols=hrb

Caci like Immucore, is a growth company - and both are bucking the trend. Which means that they show up on the radar screens of those who are interested in investing in such companies, particularly when they have consecutive record-breaking quarters.

So these investors consider such companies "speculative", but worth the risk... as long as the story holds up. If there is any question about earnings and/or growth, they sell very fast. Which is what happened to both Caci and Immucure (even though, in both cases, the "news" was completely false).

H&R Block went through a similar catharsis back in November of 2002. In HRB's case, the news was somewhat justified. HRB was not informing their clients of a kickback relationship they had with a mortgage broker they were recommending (this has now been corrected). You can see the plunge if you glance at the chart, here:
http://quote.fool.com/Chart/chart.asp?currticker=hrb&symbols=hrb

Thoughts
I have found that even though such drops may be more psychological than a meaningful change in a company's fortunes, the stock will almost always continue to drop for several days after the "news" before investors and institutions start picking it back up. I believe that many investors are simply looking to see how far "down" really is - and thus, hold off from putting new money into a company that may fall further.

I have also found that the only real money I've ever made in the stock market has been based on buying a quality stock at a low point. So I look for such opportunities as a buy point. And yes, it is difficult to know when to buy - but when a company with a strong growth rate, positive cash flow, and other sound fundamentals falls precipitously, I now look for a buy point about 3 to 5 days out from the drop.

I also find that when such opportunities occur, I have a very strong impulse to buy at the current low. This I have found to be a mistake. In almost all cases I would have found a better buying point by waiting a few days.

I do look at the charts looking for support levels, but in many cases stocks with "negative news" plunge down through their most recent support levels, then take several days or even weeks before that same level (now resistance), becomes support again.

Immucore has dropped down to recent support levels. My experience suggests that there may be more downturn left, but only for a day or two (depending on how the general market performs). In any case, we are rapidly approaching a good buy point on a strong company.

What to do
If, after doing your own research on Immucore, you find that the company meets your criteria for a company you would like to invest in, put in a STOP BUY order at some point below the present price. Or just buy it now, with the expectation that it could very well go lower before bouncing.

Just my 2¢

Jon
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Tax Strategies

TMFPMarti-Feeling Good
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement