Whoa! What Just Happened to My Stock?http://www.fool.com/investing/general/2011/04/13/whoa-what-just-happened-to-my-stock.aspx Rich Duprey
April 13, 2011
Resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that upward leap was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.
Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners, and see whether they're truly headed into orbit.
After three consecutive days down, the markets dropped another 117 points yesterday, or almost 1%, as economic forecasts were revised lower and pessimism crept back into the equation. So stocks that went significantly higher are pretty big deals.
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Of course, Tenet may have gone and cut off its nose to spite its face. The level of outrageousness contained in the allegations is likely to spark a federal investigation, not only of Community Health, but Tenet, too. Indeed, the entire sector was trading lower the other day because of the charge and the prospects of regulatory nosiness.
Yet Community Health's stock bounced back yesterday as further reflection suggests the company's billing practices may not be the outlier Tenet says they are. The federal program and insurers have been complaining for years over admitting patients that might otherwise have been seen on an outpatient basis. It's possible Community Health is in the mainstream of industry practice, though that casts something of a pall over the entire industry.
That's in line with CAPS member AStarSearch's thoughts on what the ultimate outcome of the charges will be: "Banking on the law suit being without merit. Well, actually I am inclined to think that they probably rip off Medicare. But I am betting that they will go unpunished."
Let us know on the Community Health Systems CAPS page or in the comments section below whether Tenet is onto something or has decided playing Russian roulette is a valid takeover defense.
Not an uncommon occurrence