Hi-Tech Jumps on DiabetiSweet "News" Dave Marino-Nachison (TMF Braden)
September 14, 1999
Shares of little-traded Hi-Tech Pharmacal (Nasdaq: HITK) jumped nearly 45% today on volume more than 200 times its daily average for the last 30 days after the company's Health Care Products division issued a press release describing its DiabetiSweet "Measure for Measure" product as "the first-ever bulk sweetener that can completely replace sugar in baking and cooking."
Investors might be wondering where Hi-Tech came from; with a market capitalization of less than $30 million and less than 8,000 shares trading daily over the past 30 sessions, the company -- which today eclipsed its old 52-week high by a wide margin -- certainly snuck up on this Fool.
When that happens, probably the best thing to do -- better, even, than typing the company's name into your browser window or favorite search engine -- is to head over to one of the many SEC filings areas online and dig up the company's most recent 10-K or, if it's a recent IPO, it's S-1. Either one will have a section describing the business in detail.
In Hi-Tech's case, it turns out we've got a fairly well-established company with products many consumers have probably used: it makes prescription drugs, over-the-counter medication, cold, cough and asthma remedies, vitamins, and other products that it turns around and sells to drug stores, drug wholesalers, generic distributors, mass merchandise chains, and mail-order companies. The Health Care Products division makes consumer products such as sugar-free cold and cough remedies for diabetics.
Of course, in this case it also turns out DiabetiSweet is hardly a new product; it's been around for some time. What today's press release is really trumpeting isn't DiabetiSweet per se, but a new "Measure for Measure" version of the product -- which due to a new formula can be cooked and baked and can be used in the same proportions as are called for in recipes.
While that's news, it doesn't really seem like the kind of news that should boost this company's market capitalization by as much as 90% midday, as Health Care Products' total sales came to less than 20% of the company's revenues for the fiscal year ended April 30.
It didn't stick, as the stock fell from its post-lunch highs fairly precipitously this afternoon. (And although it can hardly be said that the company's release was misleading, it nevertheless befuddled several -- but not all -- news agencies and this reporter.)
That it was still up nearly 45% at the market's close suggests that there are quite a few people out there who still haven't -- and possibly never will -- take the time to read the press release a bit more carefully. This kind of thing happens more frequently than it should, as investors -- probably day traders for the most part -- skim releases and get key words, descriptions, and even companies wrong in their haste to make a fast dollar.
Some, presumably, win, but try to make a living timing the reading comprehension of others and you're in for a short career.
Look for this one to continue heading back from whence it came tomorrow.
And be careful.
Health Care Products Web Page