Diamonds and Dogs

7/31/12

Coach Inc. (COH)

Coach Inc. went on sale today down, 18.62% at $49.30. Shares of luxury handbag maker crashed after its quarterly sales came in below Wall Street expectations. Strong sales overseas helped boost Coach's first-quarter profit 24%, but sluggish U.S. demand is triggering serious concerns over high-end spending. Coach's management had to lure cost-conscious North Americans away from cheaper rivals with increased promotional activity, raising worries about profitability going forward. The company's struggle to maintain profitability mixed with a slow world economy make investors weary of discretionary products/companies. CEO Lew Frankfort said, "We're committed to achieving double-digit top- and bottom-line growth over our planning horizon. We have a business model that generates significant cash flow and we're in a position to invest in our brand while continuing to return capital to shareholders."

Accretive Health Inc. (AH)

Accretive Health has weathered the storm, up 35.51% at $13.57. Shares of the medical billing services provider soared after reaching a settlement with the Minnesota Attorney General's office over an ongoing lawsuit. Under the settlement, Accretive must pay $2.5 million and stop all business operations in Minnesota within the next 90 days. However, this is a positive because it removes a dark cloud of uncertainty that has shadowed the company. The stock has been under pressure ever since Minnesota Attorney General Lori Swanson accused Accretive of overly aggressive collection tactics in January. The settlement should give perspective investors enough confidence to buy. The settlement also allows Accretive to move on without admitting any liability. Furthermore, management said it doesn't expect the settlement to hurt them financially.

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