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Biotech / Medical : Staar Surgical STAA
STAA 25.26-2.4%3:59 PM EST
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To: Secret_Agent_Man who wrote (10)6/20/1998 1:16:00 AM
From: Alan A. Hicks  Read Replies (1) of 50
 
Recent weakness likely caused by the "reconstitution" of the Russell 2000. This is an annual event that has been written in the
Wall Street Journal and other publications.
It has been getting more and more attention each year. Brokerage firms such as Merrill
Lynch and others have been publishing lists of who is likely to be deleted from the
Russell 2000 ahead of the actual changes.
Studies in the past have shown that companies that were deleted fell right after the
publication of the list but within 2 weeks had recovered the loss.
What may be happening this year is that it is getting so much attention that the deleted
stocks are falling sooner as the Index funds who must eliminate the positions
are anticipating the changes.
Also short sellers could also be trying to take advantage of the deletions ahead of time.
It looks like the damage has been done to STAA and it is now in its recovery phase.
Fundamentals at the company are positive. Should earn in the high 50 cent range this
year and $0.85 or so next year. New products should be growing nicely by then.
Potential for very strong earnings growth by then.
Nice buying opportunity here. Had a company last year that was deleted from the
Russell 2000. Went from $11 to $9 came right back and went on to be bought out at
$22 per share 7 months later.
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