Investors stormed out of former momentum superstars

Idexx Laboratories

(IDXX) - Get Report

and

Medic Computer Systems

(MCSY)

on Monday after the companies announced they'd miss earnings estimates for the quarter by wide margins.

Idexx, which makes animal diagnostics equipment, skidded 20, or 63%, to 12, while Medic, a health-care information services provider, plunged 14 7/8, or 53%, to 13 1/8.

The brutal selloff came just weeks after analysts released a flurry of roseate reports about the companies. The dissonance raises troubling questions about the credibility of some research on momentum stocks, which need to show continued improving growth rates to attract investors.

After the release of bad news Monday morning, many analysts scrambled to lower their investment ratings on the stumbling stocks.

Expectations for momentum stocks run very high, and investors demand that the companies beat analysts' high earnings estimates. Missing earnings by even a penny can cost companies millions in market capitalization.

Both companies are heavily owned by institutional investors, who often flee at the first sign of trouble. Prior to the selloff, Idexx was 86% owned by institutions, including pensions, mutual funds and hedge funds, according to

CDA/Spectrum

, which tracks equity data. Medic was 88% owned by institutions.

Maine-based Idexx said its first-quarter profits would come in between 2 cents and 5 cents per share, far below the 21-cents per-share consensus estimate on

First Call

. Medic, based in North Carolina, said first-quarter results would come in between 14 cents and 18 cents per share, off the 27-cents-per-share estimate.

Analysts were astonished by the fury of the selloff, which claimed similar companies as collateral casualties. "It's like a 2-for-1 stock split," says Randall Huyser, a health-care analyst at

Furman Selz

, of Medic's collapse. "We've been neutral. Thank God." Furman Selz has not done any underwriting work for Medic.

The severity of the selloff was reminiscent of last year's slaughter of

HCIA

(HCIA)

and

Medaphis

(MEDA)

, both of which operate in the health-care information services category, as does Medic.

Last October, HCIA fell 46% after it announced it would miss its third-quarter earnings estimate; the announcement prompted a series of downgrades. In August, Medaphis skidded 60% on a similar scenario. Neither company has recovered to pre-bad-news levels.

On Monday, HCIA slipped 4 to 24, Medaphis dipped 3/8 to 10 9/16 and

HBO & Co.

(HBOC)

, another health-care information services provider, dropped 2 7/8 to 54 1/2 amid sector concerns.

Analysts, however, say Medic is different. Unlike HCIA and Medaphis, which concentrate on narrow segments of the market, Medic provides broader services to physicians and group practices.

"This is the first stumble the company has had in about four years," says George Shipp, an analyst at

Scott & Stringfellow

in Virginia. Shipp used the massacre as an opportunity to raise his rating on Medic to buy from hold. Scott & Stringfellow has not done any investment banking work for Medic.

Stephen Lieber, the portfolio manager of

Evergreen Fund

(EVRAX)

who owns both stocks in his fund, said that the blowup caught him by surprise and that he was waiting to discuss further plans with his analysts. "Management said it was a blip, and we have to go by that for now," says Lieber.

Two

John Hancock

funds also got caught in the carnage.

Special Equity

(JHNSX)

has 1.1% of its total net assets in Medic and

Global RX

(JHGRX)

has 1.62% in Idexx, according to a fund spokeswoman.

Some of the other funds that have recently owned shares of the two companies will be familiar to anyone who has followed the wave of momentum shakeouts:

PBHG Growth

(PBHGX)

held positions in Medic as of September and Idexx as of December, according to CDA/Spectrum.

Putnam Management

owned 13.6% of Medic, with shares held in

New Opportunity

(PNOPX) - Get Report

,

OTC Emerging Growth

(POEGX)

and

Vista

(PVISX)

as of Dec. 31, a Putnam spokesman says. The management firm also owned 11% of Idexx in New Opportunity, OTC, Vista and

Voyager

(PVOYX)

as of Jan. 30, the spokesman says.

Alger Management

owned a chunk of both stocks as of December, according to CDA/Spectrum;

American Century: Twentieth Century

owned 642,000 shares of Medic in

Ultra

(TWCUX) - Get Report

and 653,000 shares of Idexx in

Vista

(TWCVX)

as of Oct. 31, according to a company spokesman.

Idexx declined to comment on the company's wild ride. Medic didn't return phone calls.

By Andrew Morse and Avi Stieglitz

amorse@thestreet.com

astieglitz@thestreet.com