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Market whax EPAX



October 25, 2007 – Comments (1)

Okay, I had a green thumb nosedive more than 50% in three days (44% in one day). It's Ambassadors Group, Inc (EPAX), a company that provides international educational trips for students and professionals. (Actually, I'm doing even worse with RDN, but since that one's a mortgage insurer, it's not really all that shocking.)

How could this happen to EPAX? It's a good company, with a real service that doesn't participate in housing, mortgage reinsurance, or lying to cancer kids! Well, if an All-Star recommended it, and it's not some speculative turnaround play, and it tanked 50%, that adds up to buy, buy, BUY! ....right?

Not so fast, boys and girls. EPAX reported a 29% drop in revenue.  (I'm going from memory here because of time constraints, so pardon any errors.) That's huge. While a 50+% drop in price seems like an overreaction to a 29% drop in revenue, I've seen bigger overreactions. In fact, most of the money in EPAX (as well as my CAPS money) was there for the revenue and earnings growth. That's significant. If you go in the wrong direction, suddenly you're not a growth stock anymore. You're a value stock (and should be priced accordingly), or you're a value trap (and will be priced accordingly eventually). EPAX < $20 per stub, knowing what I know today, is no more compelling a buy than dozens of other opportunities I could find. And I'm thinking of ending the pick at these levels. (Though I may try an accuracy recoup.)

1 Comments – Post Your Own

#1) On October 25, 2007 at 8:27 PM, retailsails (98.48) wrote:

I was following EPAX as well - fortunately, I didn't hold in my real $$ account, and closed my CAPS pick with a nice little gain.  I believe it got hammered so bad not because of this disappointing quarter, but rather for next year's guidance which was rather gloomy.  However, management has shown before that they can weather the downturns, and I believe this is a long-term buy and hold opportunity...

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