Re: [CANSLIM] Case Study

From: "Norman" <theboyd@tisd.net>
Subject: Re: [CANSLIM] Case Study
Date: Sun, 18 Aug 2002 17:39:12 -0500
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For sure Katherine, not CAN SLIM material.  As I look at a 3 yr chart, this
one hasn't been a valid CAN SLIM issue for a loooong time.  As you and Tom
pointed out, the technicals were waaaaay ahead of this latest news<G>
Anyway, lets put our hands together for "technicals God"; He/She kept us out
of trouble, again!  Good example, thanks for posting it.

Norm
- ----- Original Message -----
From: "Katherine Malm" <kmalm@earthlink.net>
To: <canslim@lists.xmission.com>
Sent: Sunday, August 18, 2002 5:00 PM
Subject: Re: [CANSLIM] Case Study


> Hi Norm,
>
> Here's another great example as to how technicals tell the story more
> clearly than the fundamentals or the news. On April 8th, the SEC announced
> that it was closing its investigation.
>
> "PolyMedica Corporation Receives Notice That SEC Investigation Has
> Terminated Apr 08, 2002
> PolyMedica Corporation announced that it received a notice from the
> Securities and Exchange Commission stating that the Commission's present
> staff inquiry into the Company has been terminated. The notice also states
> that no enforcement action has been recommended to the Commission." (See:
>
http://yahoo.marketguide.com/MGI/signdevt.asp?target=/stocks/companyinformat
> ion/signdevt&Ticker=PLMD)
>
> (A read through the significant developments itself is like a mine field
of
> red flags. )
>
> That announcement was followed by a big price spike, just as you noted,
as
> people reacted to the news.  This spike came, however after a steep
decline
> in the price and was immediately followed by a high volume reversal day
and
> a series of days where price was climbing on low volume ("wedging"
> action)--the stuff of sell rules if nothing else. Notice that price at
that
> point continued on the path of least resistance and the downtrend began
> again.
>
> Price action essentially told us already what wasn't stated until this
> week's 10Q, i.e., the original investigation was being expanded in scope.
I
> didn't include all the details in my original quote, but the status of the
> law suits and investigation are included in the section under "Legal
> Proceedings." (See link to SEC filing in my original post)
>
> As Tom suggested earlier today, there's no telling how all this will play
> out, and the powers that be may well be exonerated. But, in the world of
> CANSLIM investing, there's no reason to take the risk in the meantime. If
> price/volume action and fundamentals set up appropriately, then PLMD may
one
> day again be a good candidate. In the meantime, once there's a stinky fish
> in the works.....it's hard to get out the stench.
>
> Katherine
>
> ----- Original Message -----
> From: "Norman" <theboyd@tisd.net>
> To: <canslim@lists.xmission.com>
> Sent: Sunday, August 18, 2002 12:14 PM
> Subject: Re: [CANSLIM] Case Study
>
>
> | 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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