Re: [CANSLIM] Case Study

From: "Norman" <theboyd@tisd.net>
Subject: Re: [CANSLIM] Case Study
Date: Sun, 18 Aug 2002 12:14:30 -0500

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Crimony!  They got more troubles than freshmen at a fraternity hazing<g>

I guess no one noticed anything amiss on April 8th; what a spike!

Norm

- ----- Original Message -----
From: "Katherine Malm" <kmalm@earthlink.net>
To: <canslim@lists.xmission.com>
Sent: Sunday, August 18, 2002 11:12 AM
Subject: [CANSLIM] Case Study

Hi All,

Just thought I'd pass on a recent example that demonstrates the following
points:

(1) Fundamental screening based on past performance doesn't always "tell the
tale"
(2) Technicals always lead to the downside
(3) It pays to perform due diligence
(4) Never be tempted to enter a stock while it is still basing

Here are the stats aside from the technical condition:
EPS = 92, SMR = A, EPS Growth rate (historical) = 61%, Composite rating =
82, ROE = 21%, Debt = 0%.

Sounds good, doesn't it? Now, take a look at a chart of PLMD.

When you're finished, read this passage excerpted from their 10Q filed this
week:
Item 13 Under "Notes to Consolidated Financial Statements" (Highlighting is
mine)

. ... The regulations that govern Medicare reimbursement are complex and our
compliance with those regulations may be reviewed by federal agencies,
including the Department of Health and Human Services, the Department of
Justice ("DOJ"), and the Food and Drug Administration ("FDA"). The U.S.
Attorney's Office for the Southern District of Florida, with the assistance
of the Federal Bureau of Investigation ("FBI") and Department of Health &
Human Services' Office of Inspector General ("OIG"), is investigating
allegations of healthcare fraud, improper revenue recognition and
obstruction of justice by PolyMedica. Both civil and criminal investigations
are being conducted. We are cooperating with the investigations. We cannot
accurately predict the outcome of these proceedings at this time, and have
therefore not recorded any charges relating to their outcome.

We and three individuals who are or were officers are defendants in a
lawsuit alleging violations of certain sections and rules of the Securities
Exchange Act of 1934 (the "Exchange Act"). In addition, there is a
derivative action against the directors and two individuals who are or were
officers in Massachusetts state court alleging certain breaches of fiduciary
duty. We, the named individuals, and the Board of Directors believe that we
have meritorious defenses to the claims made against us in the actions in
which we are defendants and intend to contest the claims vigorously.
Although we do not consider an unfavorable outcome to the various claims
probable, we cannot accurately predict their ultimate disposition, and have
therefore not recorded any charges related to their outcome. An unfavorable
outcome could have a material effect on our financial position and results
of operations. Please see Item 1 of Part II, Legal Proceedings, for a more
complete description of these claims.

If any of these investigations results in a determination that we have
failed to comply with the regulations governing Medicare reimbursement or
financial reporting or have otherwise committed healthcare fraud or
securities law violations, we could be subject to delays or loss of
reimbursement, substantial fines or penalties, and other sanctions. An
adverse determination could have a material effect on our financial position
and results of operations.

(ref:
http://www.edgar-online.com/bin/edgardoc/finSys_main.asp?dcn=0000950135-02-0
03770)

Add to that a sudden resignation of their CEO at the beginning of the month.

- --Katherine

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