Among the biggest losers in Thursday's early trading are
Top Percentage Losers -- Thursday, July 1,
Company Name (Ticker)
*Table includes companies with minimum market
capitalizations of $200 million and three month trading
volumes of at least 100,000 shares. All percentage returns
are listed as of 11:53AM Eastern Standard Time . Click on
ticker symbols for up-to-the-minute price quotes and
percentage gain data.
For Amedysis, the Hits keep on Coming
As Frank Sinatra sang in "That's Life," "Riding high in April, shot
down in May." For
, June was also a bummer, and July is off to a bad start as well.
Back in Late April, the home health care provider delivered solid
quarterly results, and its shares sat comfortably above $60. At the
time, a little-noticed article in
The Wall Street Journal
came out suggesting that some home health-care providers -- most
notably Amedysis -- were billing Medicare for more home visits than
it was actually conducting. Two weeks later, the Senate invited
company executives to come and testify. That sent shares below $50.
As June rolled around, a passel of class-action lawsuits hit the
wire, pushing shares down further.
Fast forward to this morning, and shares are plunging -15%. That's
Securities and Exchange Commission (
has begun its own investigation, following up on the Senate
inquiry. To recap, the company is now vulnerable to very severe
restrictions on its business from regulators, and potentially hefty
fines from the SEC. And that can't be good.
Action to Take -->
Don't catch this falling knife. When the dust settles, shares could
be well lower, and the company's operating restrictions and
potential liabilities will become clearer. You can re-assess
whether shares represent value at that point.
Almost Family (Nasdaq:
, which operates in the same industry, is also being investigated
by the SEC. Its shares are down by a similar amount, and the same
advice applies. The Senate is also investigating
Gentiva Health Services (Nasdaq:
, which is also down sharply, although it is unclear whether the
SEC has also piled on.
Xyratex's Inexplicable Slump
This one's a head-scratcher.
, which makes data storage products, posted a really strong quarter
Wednesday evening. And the company issued solid forward guidance,
adding that new partner Hitachi may represent a significant chunk
of new business in coming years. And shares are plunging -10% on
Thursday. Go figure.
Could the sell-off be the result of the fact that per-share profits
"only" exceeded estimates by +10%, compared with +23% upside in the
prior quarter? Could it be because gross margins of 18.2% were
sequentially flat after rising in recent quarters? Probably not.
Instead, blame it on the misfortune of releasing solid news on a
day when the Nasdaq is once again plunging.
Shares have now fallen from $20 to $12.50 in the past two months,
even though the company's outlook is materially improved since
then. While analysts had expected Xyratex to earn $0.87 in the
current quarter that is now one-third completed, management thinks
could approach $1.16. And while Xyratex had been expected to earn
nearly $4 a share in fiscal (November) 2010, that forecast now
looks to be shy by about 10%.
Action to Take -->
The fact that shares trade for around three times likely earnings
is a bit deceptive. EPS are expected to fall back below $3 next
year, as demand cools in a slower-growing economic environment. But
now that Xyratex can count on Hitachi as a key new customer,
earnings could power higher once again in subsequent years. This
stock is ultra-cheap, and should rebound nicely when investors stop
sprinting away from tech stocks. If you've got a strong stomach,
this is a great time to be buying tech.
Dendreon's Costly Problem
was a super hot-stock during the past few years, as its shares rose
from a few dollars in March 2009 to $57 in May 2010. Investors grew
excited over the company's prostate cancer-treating drug, Provenge.
Trouble is, a full treatment of Provenge costs nearly $100,000 per
patient. And when you consider that many prostate-cancer sufferers
eventually die from something else (prostate cancer develops very
slowly), it's fair to question if Provenge is worth it in this
cost-constrained health care environment, and that's just what the
Center for Medicare and Medicaid Services (
) is doing.
CMS will take its sweet time, and get back to Dendreon within a
year or so. The regulators would like to get feedback on if the
drug is deemed to be overwhelmingly effective to justify that
expense. The clinical data for Provenge have been quite strong, and
strong support from the medical community would likely positively
sway the regulators.
Action to Take -->
This is a real overhang on shares, and they may stay stuck at these
lower levels until the issue is resolved. Shares have lost half
their value in the past few months, and would see a solid spike if
CMS rules favorably. If CMS rules against Provenge coverage, or
restricts its use, shares are likely to fall further.
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.