Why I'm Taking a Chance on Meridian

Every once in awhile I just break all of my rules.  (And I usually regret it as well!)

I wanted to report on my latest indiscretion.  Meridian (VIVO), a holding of mine, reported yesterday.  Latest sales for the third quarter increased 11%.  EPS came in at $0.19/share, down from $0.22/share, but last year included a tax benefit of $2.4 million.  Taking this out it worked out to $0.19/share this year vs. $0.16/share a year ago.

Anyhow, the market has absolutely taken this stock apart.

Daring to go into the jaws of this awful negative momentum, I purchased 2,000 shares of VIVO yesterday afternoon at an average cost of $23.99/share.  As I wrote this, VIVO had already slipped BELOW this price, and was  trading at $23.81/share, down $4.93 or 17.15% on the day.

I think this is way overdone. I am trying to think rationally in the face of apparent market madness, which can be a recipe for failure for me.  But I shall put my contrarian hat on, hold my nose, and keep you posted.

Disclosure:  The author owns VIVO.

Comments

[Jake Blues:]

Are you a masochist?

2008 Jul 18 07:27 AM

[chazzzzz:]

I agree with you Robert. Way oversold . I own some Oct 25 calls @ around $4 and got clobbered. Down about 50% but I wouldn't need much of a bounce to even again.

Any drift down to $22.50 and I will be buying those ITM Jan-09. Last earnings it took a serious implosion only to consolidate and recover $3+. I give it about a month and we should be up %10. With ITM options a 10 % would = equal about an 80-100% move then you sell short calls against it. Great strategy if you call the direction right.

2008 Jul 18 06:33 PM

[Janisree:]

Well, even an upgrade is sufficient for a 10% move...as happening today! This is an excellent company and stock (has been outperforming SP500 by 39.2 37.0 20.0 points for 3, 5 and 10 year periods...(morningstar... 20+ ROA and ROE. Add on dips (selling short term calls during earnings has been "good" for the past 2 announcements)..... Disclosure: Long VIVO

2008 Jul 21 10:01 AM

[Robert Free...:]

Jake,

No I am not a masochist. I now have unloaded 1500 of those 2000 shares at about an average gain of 1.5 points.

Trying to keep my hands off the last 500 for awhile.

Just lucky I guess. Sometimes it pays to swim against the tide. Usually I have to call a lifeguard to pull me out :).

2008 Jul 21 06:47 PM