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THE DAY AHEAD: Investing sheep follow Healtheon-WebMd off a cliff

The trading in any old healthcare-technology stock following of the Healtheon-WebMD merger shows why some folks just shouldn't have access to online trading accounts.

Although you could argue the math behind the Healtheon-WebMD is a bit absurd -- WebMD barely has any revenue -- the side effects of the merger were just plain wacky.



Healtheon-WebMD: Good deal?



Once the long-awaited news came out that Healtheon-WebMD (Nasdaq: HLTH) merger was official trigger-happy investors followed the herd and bought anything health-care related that had anything to do with technology.

The most obscene run-up of a stock that has absolutely nothing to do with the Healteon-WebMD combination is Adam.com (Nasdaq: ADAM), an educational software company that added the .com May 5. Shares of Adam.com jumped as much as 50 percent on takeover speculation before profit taking cut the gains to 12 percent by the end of the day.

If anyone bothered to look, they'd realize adam.com used to be known as A.D.A.M Internet Health for a few months and A.D.A.M Software Inc. before that. Turns out the first name was most accurate.

Adam.com is essentially a software company that distributes cool educational products for the medical and educational markets. It has loads of content and hopes to distribute it online.

Healtheon distributes medical information over the Web and WebMD is a medical resource. According to message board theory the Healtheon-WebMD combination means adam.com and its rich content will be bought.

One problem: Adam.com doesn't deserve the .com. All of its revenue comes from licensing and selling software. Sure it changed its name, moved its Internet operation to San Francisco, inked a few distribution pacts and acquired a pediatric Web site, but has no real sales to show for it.

In adam.com's latest quarter ending Dec. 31, the company reported sales of $1.1 million, down from $1.8 million in the same quarter a year ago. Losses were 13 cents a share, reversing a profit of 4 cents a share.

But adam.com was just the beginning.

Healtheon-ish companies such as Advanced Health Corporation (Nasdaq: AHTC) jumped as high as 40 percent before closing up 29 percent. Onhealth Network (Nasdaq: ONHN) jumped 20 percent before closing flat. Claimsnet.com (Nasdaq: CLAI), which processes billing for medical and dental offices, added 26 percent.

Of course with Microsoft and a host of other big-time tech companies investing in Healtheon-WebMd, the aforementioned hot stocks may not have much of a chance going forward.

Then it gets really weird. Sabratek Corp. (Nasdaq: SBTK) soared 22 percent. But Sabratek is a little off the beaten path. It makes medical equipment such as the "Rocap pre-filled flush syringe."

The worst Healtheon-WebMD run-up of the bunch was Twinlab (Nasdaq: TWLB), the vitamin company. Twinlab shares were up 14 percent on no news. Twinlab's ticker, however, did turn up on the Healtheon message board.

So now what? Here comes the cliff. All of the above that didn't already fall on profit taking will today. The sheep will go along with them.