Around this time each quarter I begin checking institutional activity for the prior quarter. While 9 of the 10 largest institutions have not as yet reported, those that have have shown an aggregate reduction. It is the first time that institutional exposure has declined since I first invested in the company. So far, we have declined from 78.5% to 74.8%. One institution declined by 800,000 shares and two others declined by 400,000 each. Seven institutions, including the above, reported an aggregate decline of 2,049,000 shares.
There are many reasons for the rapid decline of this stock from early April until now, but in my opinion, the institutional herd instinct is the biggest. In the first quarter Novadaq unjustifiably became a momentum stock with the institutions piling in. This drove the stock up to a pps of $24 and it was way over bought. In April, with the company making absolutely no announcements, the stock declined 40%, as the institutions have and continue to pile out. We are now in the most oversold position in several years, with the RSI declining to 17.5% at its low yesterday. With only 55 million shares outstanding, the stock is being whip sawed by the herd mentality of the institutions.
endo - no doubt this stock became part of the biotech momentum stock universe, but with good reason - they were generating 40%+ revenue growth from their existing products and had two new products in Luna and Pinpoint that could potentially drive revenue growth into the 50%+ range. At $24, the stock was priced for perfection and I didn't think it would hold that level unless results were stellar, but with sales from LifeCell and ISRG floundering, we've been cut in half. With the fiscal year-end of the mutual funds looming in Oct, you could see further selling pressure, as funds with losing positions do some "window dressing", especially since Arun has already said Q3 results were going to be weak. This is just another reason I am praying for a sale of the company - although the primary reason still is that NVDQ is sitting on the some of the most compelling technology in the medical system space and they don't seem to have the leadership or resources to take full advantage of it.
Damn, i sure hope they don't sell us out!
I invested for the long haul and see a future where every serious surgery set up has our devices ready to hand.
I'm patient and expect to ride out the inevitable bumps in the PPS.
You indicate that Arun indicated that the 3rd quarter would be weak. My recollection is that he indicated that the 3rd quarter would come in at a growth rate of 35% but that would be offset by a stronger 4th quarter, with overall growth for the second half coming in at the projected 40%.
You acknowledge that the company is sitting on some of the most compelling technology in the medical system space. I could not agree more and it is compounded by the fact that there is no competition presently or on the horizon. If anything, the recent acquisitions are going to further extend their lead in their space. It was Arun who got them to this point, why lose faith in him now.
You want them to be bought out. At what price? $18 or $20 or $24? Will Johnson and Johnson pay a 100%.
markup? Even if they did, is that fair value for their technology? Look, I would agree that the battle field is covered with the bodies of Doctor CEO's who could not cross the bridge to becoming Business CEO's.
In my humble opinion, Arun is developing an excellent business model that will take full advantage of the company's superior products and competitive advantage. At the moment, I, for one, am not going to let the pps volatility take my eyes off what he has accomplished to date.