Stock Checkup: Meridian Bioscience (VIVO)

I wrote about Meridian Bioscience (VIVO) on April 7, 2009. This stock was trading at $16.90 then with an excellent yield of 4%. The stock has moved up 27% since and closed today at $21.60. I do not have any explanation for this movement except that Meridian at a 4% yield is undervalued and should be bought. The chart below shows the performance of Meridian since 4/7/09.

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Note that this stock took a big hit on 4/16 and someone accused me of "pumping". Here is a direct quote from "Jolly_Rancher" from SeekingAlpha:

"Just like most of the crummy stocks that are pumped here on seekingalpha, VIVO took a major dive today on lower guidance. Glad I passed on this one."

My model tells me Meridian is a buy in the $14.50 range and strangely enough, this stock hit a yearly low of $14.79 on 4/16/09. I praised Meridian on their impressive dividend records and strong balance sheet. Today, I revised my model and strangely, my fair price for Meridian is $21.60 (same as today's closing price after falling 3.27% in a day).

As a value investor, my strategy is to buy shares of companies that are considered undervalued and sell them once I consider them to have reached fair value. This stock is a great long-term investment but only at the right price. At this point, the shares have outperformed the DJIA, S&P 500, Nasdaq, and Abbott (ABT) (see chart below).

click to enlarge

If I want to remain in the market, I would sell Meridian and buy Abbott (yielding 3.6%) as a replacement.

Disclosure: None

Comments

[user 54079:]

It is 8:30 AM (11:30 A.M, N.Y time) and you have the closing price at $21. 60 ? Good for you to know the future 41/2 hours before close.
Are you aware that Meridian is coming out with a new 'LIGHT' molecular diagnostic testing platform in September. The coming flu season is expected to a severe one and their 'new' flu test has boosted their margins on flu testing and accounted for their better than expected last quarter.
This stock has been a consistant winner and jumping in and out of stocks as you suggest has been proven to be a losers game.

Aug 07 01:04 PM

[Arsuron Pap...:]

Please refer to my original post on my blog. My writeup was posted at 3:37pm. Once I submit this to SeekingAlpha, it took a little time to post. Frankly, I don't quite care what exact price as long as it is in a range. Selling today would still give you 25%.

Now, about the coming flu season and their new product. May be investors knew about this back in May and bought the stock up to this level. Another word, it is PRICED IN. Honestly, I DON'T KNOW!

All I know is this stock pay 4% yield at the time I bought. Selling it today (25% gain) gives me 6.25x the dividend payment. I wrote this because I saw better opportunity in Abbott which have underperformed. I do not suggest people jump in and out. I suggest people weight in risk/reward.

Aug 07 05:25 PM

[Dividend Inc:]

Hi User 54079,

According to the article, the author states quite clearly that as a value investor, he buys below what he considers fair value and tries to sell at or above fair value. Holding for 3 months isn't exactly day trading.

Additionally, not having a selling strategy wastes valuable capital and time as some people found out from October 2007 to March 2009. Suggesting a strictly buy and hold strategy implies that nothing has been learned in the last year and a half.

While transactional costs are a significant part of why traders lose money, the fact that if you had bought VIVO on the date of the recommendation, or the day after, you would have walked away with a gain of nearly 27% is quite reasonable.

Although this is clearly a cyclical bull market (or bear market rally) within a secular bear market, I would opt for the meager bird in the hand (25% gain) rather than the bird in the bush (upcoming flu season, new products in the pipeline.) Your mention of the prospects for the future relies too much on hope rather than the reality of the present.

Also, I think that the author was referencing the closing price of Thursday August 6, 2009 and not trying to predict the future. By the way, Meridian is a great company with pristine managment.

Aug 07 05:56 PM

[user 54079:]

The FACT that they are coming out with a molecular test, the FACT that the flu season WILL Be a fearful one, are your characterization of hope rather than reality, unless you characterize hope as anything that has yet to happen. I invest on the good possibilities in the future. Taking a profit of 25% of $21 then giving short term taxes to the government may be to some a 'good idea' , but fortunes have been made by people who bought and held good stocks. That truth has been lost on the generation, of TV's one hour from crime to solution, fast food, and short relationships. If one plays the market as 'hit and run', one never gets a run that can really make them something other than 'chump change'. Paying capital gains taxes, is also, less painful.


been made been

Aug 15 11:14 AM