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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:

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.

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:

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:

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:

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¢

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Thank you for your analysis. I try not to follow the day to day trading of my portfolio so I hadn't really given the reason behind the drop much thought. I'm glad to see that it appears to be just a "low tide" for BLUD's competitors rather than a problem with the company itself.

I had noticed the CEO's insider trade filing and was about to dig into that when I read your post. Your explanation was on the money.

I don't have much to add at this point but just wanted to say thanks for some very thorough and thoughtful analysis.

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Even the CEO appears puzzled by the stocks behavior.

Immucor's president and chief executive officer, Edward L. Gallup, commenting on the volume of trading in the Company's stock, stated, "The Company recently provided guidance for the current quarter and fiscal year in a press release and conference call on January 7, 2003. We have not altered that guidance and are not aware of the reasons for the recent volume of trading in our stock."

taken from a BLUD press release

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