Expert: Paul Henneman - 4/13/2005

Question
I've invested in this company for a short while and it looks great in every aspect.  However the stock price continues to fall.  Why?

Thanks much.

Answer
Ed,
  Thank you for your question!
  There are really three reasons why a company stock price could continue to fall even if all aspects look good:

1. The stock price could have already taken into account the good prospects of the company, and been 'run up' before you found it. The overall concept is commonly called 'valuation'. It is possible that the company has great prospects, but investors have already seen this and bid the stock price up too high to support even good prospects for the company.

2. Overall market performance. The market as a whole has performed badly for the past few months. The market is not perfectly efficient in that often investor feelings will affect stock price in unreasonable ways. If enough investors feel that the market is headed for bad times in the near future, they may pull out and the stock price will drop, even if the data and future prospects of the company are good. Think of it as 'herd mentality', even good stocks are sometimes brought down by the overall market.

3.  There may be something that you missed, some data point, or something wrong with their future outlook.

Those are the three main points in answer to your question. The next logical step is to decide if you should stay in the stock. Often drops in stock price that are due to overall market conditions and not that companies data are relatively short term, and if you really feel that the stock is worth more, it is best to stick it out for the long term. But this only applies if you are quite certain that you have not missed anything, and if you are not looking for short term gains but are invested for the long term.

I took the liberty of looking up DHB in my research companies database to see what we have on it. To be honest, we like it also. It gets a four out of five rating, only 17% of all 4,500 stocks that we provide research on achieve a four or five rating. Only its Market/Book ratio (market price divided by book value per share (of equity)) is worrisome, all other data points appear to be at least average, many are quite good.

I could of course be wrong, there is no crystal ball. But due to the recent nature of the dramatic fall in stock price, I would say that investors are overreacting to the performance of a market as a whole. Our research efforts indicate that the fair value of the stock (what it should trade at), is just over $17.

I hope this helps! Please do not hesitate to follow up with me if I can be of any further service.


Best Regards,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com
www.VEInstitutional.com
www.VEReports.com
(800) 381-5576