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Editor's note: This article was originally published on Sunday, October 28, 2007.

Ambassadors Group (NASDAQ:EPAX) shocked the market when it disclosed that bookings for 2008 were 30% below the same period for 2007. This caused a slam down, plummeting shares from $39 to $19.

What baffled investors is that the latest quarter showed a 32% gain in net YOY coupled with steady revenue growth, It is possible that the trend has turned completely and that revenue and profits are heading south. What also is possible is that part of the lower bookings is due to a change in methodology, where participants do not wish to book until the last minute due to cancellation fees.

EPAX should state if there has been a material change in its cancellation fee policy.

On the other side of the spectrum is Wellcare Health Plans (NYSE:WCG) that got the undivided attention of some 200 FBI agents last week. Now either the FBI wanted to throw a smash shindig for one of its own or the WCG business model is in some serious trouble. The fact that there was an investigation is not ominous on its own. It is the veracity with which the FBI charged in. The few quotes reportedly murmured by FBI agents included telling employees that they shouldn't expect the return of confiscated documents and computers.

The FBI effectively disrupted the ongoing business operations at WCG. The Federal Bureau of Investigation would not put a company out of business unless they had sufficient criminal evidence prior to the raid. The legal ramifications are too great to risk a restive haddock (fishing) raiding party.

With regards to EPAX, there may be some restitution during the upcoming holiday season. Investors may have overreacted as management may have been over zealous with regard to the potential downside. As for WCG, investors did not overreact in our opinion. WCG dropped from $116 to $31 and may be headed for the chopping block.

We empathize with investors that lost their knickers this week on both of the above. We were surprised like everyone else and had no idea that bookings were down at EPAX. We did anticipate lower margins for 2008 but assumed that revenue would continue to grow, albeit at a slower pace. We hadn't a clue that there was hanky panky going on at WCG. What can we say, other than the motto of Forrest Gump (bumper sticker in movie): s**t happens.

A revised evaluation line has been posted on the EPAX chart.

Disclosure: No conflicts.

Source: Puts of the Week: Ambassadors Group, Wellcare Health Plans