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XMFHelical (< 20)




January 21, 2008 – Comments (0)

It was about 3 months ago that I did an ETF teardown on HHD - Healthshares Medical Diagnostics.  The selections have done quite well for my CAPS port - 3 for 4 on the bull calls and 2 for 2 on the short term underperforms(well, sort of, closed one and got a +4.99 - drat)..  I also closed the underperform call on HHD.  I still really dislike these narrow ETFs, but don't really expect this particular one to do badly in the coming months. But I've been lax in follow up on the picks (haven't even written pitches for them).

The one pick that continues to underperfrom is Immucor (BLUD).  And I can't say I have a good handle on this company.  They are in the blood test business, and have some solid competition from big boys like JNJ.  The company has underperformed on a couple of fronts.  First, immediately after my pick, there was some SEC investigation into antitrust like activities relating to acquisitions from the 1990's.  OK, but I'm inclined to not feel this will end up being too serious (just an impression mind you).  There was also an earnings miss, and investors are on pins and needles due to a major account going to a competitor (Labcorp) in the recent past as well.

So, what to make of BLUD here?

Well, the earnings miss is disappointing, as are decreasing margins.  I'll give the company some credence for an explanation that the new instrument rollouts are affecting margins.  This company does make good money and has very solid profitability metrics (ROA, ROE, profit margin, etc.) and the balance sheet is solid as well.  But with a P/E of 32, it isn't exactly cheap, and the market today is looking to make everything cheap.  I also can't help but feel I'm missing some emerging disruptive innovation on the competitive front (ABAX?).

But I'm keeping this as a CAPS play for now.  So far as recession proof businesses go, blood testing is right there near the  top.  But I may well be inclined to close it if it hist +5.

I know, not a real insightful post, but overdue, so I'm just looking to check off the box.



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