MDT Update

Shares Getting Crushed

By Bryan Bottarelli
Thursday, August 03, 2006 10:11 AM EST
Thu, 3 Aug 2006 15:11:00 GMT

Dear Bottarelli Research Member,

Yesterday, I received a few emails from Charter Members asking about Medtronic (MDT – NYSE).

If you recall, we entered the MDT August 50 Puts (MDT TJ) on June 27th for $3.10 and we were unfortunately stopped out o July 25th. Apparently some of you ignored the stop and held onto these puts — and you decided to email me yesterday to inquire about what to do. Well, this morning your patience (er, stubbornness) has paid off.

MDT

Right now, MDT is getting absolutely crushed. If you look at the chart, you’ll have to scan way down to see the incredible down-tick from today (marked in yellow). That equates to a $5.43 down move — which is coming thanks to a warning that MDT’s quarterly sales will fall short of Wall Street’s expectations. This warning sparked a flood of downgrades from Goldman, Merrill and Morgan Stanley. Ouch!

As you know, this HUGE down-move was what I was expecting to see a month ago, but the timing just didn’t materialize in the timeframe I allotted. Nevertheless, the theory was correct and the down-move did indeed happen, so I wanted to follow up on the position just in case anyone is still holding these puts. They’re currently trading for $4.80, a 54% jump from our original $3.10 entry price. Of course, this one will remain a loss in our model portfolio, but I wanted to recommend a “sell” in case anyone still owned them.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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