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The COO and CIO who were worth $360 Million of a $1.2 Billion Market Cap...

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September 03, 2009 – Comments (7) | RELATED TICKERS: AMED

Amedisys stock had climbed almost 40% (average for the market) from it's March low through September 3.  Abruptly it gave most of that climb back this morning, in one rapid movement,  when it announced, before the opening bell, that the President/Chief Operating Officer and the Chief Information Officer had both resigned rather abruptly, (to pursue other interests).  The share price IMMEDIATELY dropped 25% and analysts immediately lowered their ratings. 

Now if there were operation issues, no doubt the CEO would have taken the hit for the team. If there were financial concerns then the CFO might be looking for an exit a step ahead of some nice new bracelets.  A president/CFO and the Chief Informational Officer are very important posts in a highly visible Billion dollar company, (well it was a Billion dollar company before this morning).  Neither of these key players who might signal serious concerns resigned, (well at least this morning, there is always tomorrow.....).  What do a COO and a CIO do for the company that is worth 25% of market cap?  What could they do to cause a loss of 25% of the market cap?

AMED has 8% operating margins,  12% ROA,  and actually had revenue growth qtr/qtr.  Cash on hand is weak, but some companies operate on their revolving loans and don't carry much cash.  P/S less than 1, strong cash flow, and reasonable debt. Overall a strong player in the  home health and hospice services to the chronic and aging.  A market definitely growing.  IT is a market that might be impacted by the governement health plan changes, but not anytime in the near future. At yesterday's $43 per share, it looked fairly valued.  At $34 this evening, (up from the interday low of $29.71) it looks like a real bargain.

Now Mr. Larry R. Graham , Pres, Chief Operating Officer, Director and member of the Compliance Committee is reported to be 43 years old. Ms. Alice Ann Schwartz, Chief Information Officer is reported to be 42 years old.

Now I have no idea what this might have to do with anything. Two senior members of a company leaving abruptly on the same day could mean just about anything.  Well, I'm sure it means "something".

At any rate, I suspect the company will bounce back. Unfortunately it's after hours before I did my "homework", but I might be intested in some short term CALLS if this stays down until before tomorrows opening bell. The $35 spread is interesting if the company survives whatever ails it.

This could be a nice textbook case of how stop loss orders can go wrong!  It's hard not to tell people to use them, but in some cases it becomes a row of dominoes that topples in seconds. By the time the last one falls, no one knows what happened, and others jump.  The progression can make you dizzy.   I wonder what made Mr. Graham and Ms. Schwartz dizzy.......

"The above is NOT investing advice, other than the warning on STOP LOSSES".  I have no position in AMED,  (as of this writing)

 

7 Comments – Post Your Own

#1) On September 03, 2009 at 7:17 PM, TSIF (99.96) wrote:

Post date:  Some more recent articles indicate that Graham left because of difference in opinion between himself and the board on when he would be promoted to CEO.   The current CEO, Bourne, is 51 and the founder.

No additonal news on why the CIO followed the COO so quickly out the door.

 

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#2) On September 04, 2009 at 2:03 PM, darroj (33.65) wrote:

Nice post.  I don't own any AMED either, but was shocked to see it get trounced so badly.

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#3) On September 04, 2009 at 11:36 PM, Tastylunch (29.21) wrote:

This is why I believe you can beat the market, because it is much less efficient than EMH followers believe.

Perhaps these people is that important to AMED more likely they are not. CEOs are highly overrated in my view. Usually grossly overcompensated and posess a much more replaceable skill set than people think.

Could be a buying opportunity if AMED passes DD.

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#4) On September 05, 2009 at 9:06 AM, TSIF (99.96) wrote:

Looks like the COO left over difference of opinon on wanting the CEO job after he was appointed to the boad of directors. When you know the reason talent left, it can help you make a better decision on what it means.  I still think that the COO followed him as a token show of support.  I almost dumped a part time job I was doing and two other people threatened to follow me out the door. I had a quick talk with them that that type of "support" rarely works and they should find an exit strategy FIRST!   So I'm not too sure if the COO and the CIO were that good of long term material anyway!!! :)

I did buy some $35 calls, lets see if this will bounce back up. They did reaffirm earnings as an attempt to get the investors back in.

 

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#5) On September 05, 2009 at 9:30 AM, TSIF (99.96) wrote:

PS. Did you mean buy for TSF...?  I think the concern with a long term buy is that the HealthCare bills that no one knows what's in them...even the ones tounting them...will keep companies stock prices such as this one depressed for awhile. The market HATES the unknown....... !  Wonder why!  Sometimes the unknown is less scary than what you do know!!! :)

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#6) On September 05, 2009 at 7:29 PM, Tastylunch (29.21) wrote:

No I didn't mean necessarily for TSF. Frankly I don't know enough about the business to make an opinion yes/no.

I just meant if you are a bull on AMED then these sorts of events are usually great entry points. 

Most executives are not nearly as important as people assume.

You are absolutely right about uncertainty's effect on markets but the other side of it of course is that uncertainty provides the inefficiency we need to actually beat the market. :)

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#7) On September 12, 2009 at 2:05 AM, Tastylunch (29.21) wrote:

TSIF

just noticed anticitrade's system ranked AMED 5th best stock overall.

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