Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

Click HERE for my podcast on Meridian Bioscience (VIVO) and a poem by Robert Frost, "Directive".

If you have any comments or questions, please feel free to leave them here or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

As I slowly gain some confidence in this difficult stock market, I wanted to take another look at one of my past favorites, Meridian Bioscience (VIVO).  I do not currently own any shares, but have owned shares on an off since first writing about this stock on this blog on April 22, 2004.

Meridian is in the medical diagnostic test kit business.  As the Yahoo "Profile" on VIVO reports, Meridian Bioscience is

"...a life science company, engages in the development, manufacture, sale, and distribution of diagnostic test kits primarily for respiratory, gastrointestinal, viral, and parasitic infectious diseases."

Probably one of the biggest medical challenge facing this nation and the rest of the world is the 2009 H1N1 Flu (also called "Swine Flu") epidemic.  It does not appear that this pandemic has yet peaked.

Meridian was recently given FDA approval to market the "TRU FLU" kit to include claims that it is sensitive to two strains of swine flu. Tests were accomplished in the laboratory but had not been fully proven in clinical testing.  As reported:

"The research was done with strains of the virus cultured from positive respiratory specimens, Meridian said in a news release. The test hasn’t been proven yet to distinguish positive results from clinical specimens."

The swine flu epidemic is clearly urgent enough to get the FDA to expedite this labeling permission.  But the timeliness of this particular product is not what really attracts me to this company.  It is just an added "plus" from my own perspective.  This company has consistently produced solid financial results for at least as long as I have been following this stock, which is for longer than five years.

First of all, let's take a look at the latest quarterly result.

On July 16, 2009, Meridian Bioscience (VIVO) reported 3rd quarter 2009 results.  Sales for the quarter came in at $38.2 million, up 16% from the $33 million reported in the prior year.  Earnings cane in at $8.5 million, up 10% from $7.8 million the prior year and diluted earnings per share increased 11% to $.21/share from $.19/share previously.  The company also reaffirmed guidance for full 2009 year of revenue between $140 million and $144 million and earnings between $.77 and $.81/share.

On September 15, 2009, the company continued its optimistic assessment of its opportunities providing 2010 guidance of sales between $160 and $165 million, and earnings to be between $.90 and $.95/share.

Let's take a longer-term look at some more Meridian (VIVO) numbers and I think you will agree with me that the company, although small, has been generating some pretty phenomenal results.

Looking at the Morningstar.com "5-Yr Restated" financials, we can see that VIVO has steadily increased its revenue from $80 million in 2004 to $142 million in the trailing twelve months, without 'missing a beat'!  Earnings during this period have also steadily improved from $.30/share in 2004 to $.80/share in 2008.  Surprisingly for such a small company, they pay a significant dividend and have also increased it yearly from $.17/share in 2004 to $.53/share in 2008 and $.62/share in the TTM.

The company has increased its float somewhat from 34 million shares in 2004 to 40 million in 2006, but since 2006 has only increased shares to 41 million.  Free cash flow has been positive and growing with $19 million reported in 2006 increasing steadily to $26 million in 2008 and $29 million in the TTM.

Per Morningstar.com, the balance sheet for this company is gorgeous with $53 million in cash which by itself could pay off both the $12.2 million in current liabilities as well as the nominal $1.2 million in long-term liabilities reported more than 4x over!.  If we include the $49 million in other current assets, the current ratio jumps to over 8.0.  

Looking at "Key Statistics" on Meridian from Yahoo, we can see that this is a small cap stock with a market capitalization of only $916.99 million.  The trailing p/e is a bit rich at 29.50 (clearly the market is putting a premium on these financials), and the forward p/e (fye 30-Sep-10) is also a bit rich at 24.60 with a PEG reported at 1.64 (5 yr expected).

The company is reported to have 40.52 million shares outstanding with 39.42 million that float.  Based on its recent average daily volume of 258,803 shares, the 2.66 million shares out short represents 9 trading days of volume (the short ratio), well above my own '3 day rule' for significance.  There could be a rush to cover these short shares if Meridian comes out with better than expected results.  However, on the other hand, there are a lot of stockholders betting against this company especially in light of its relatively rich valuation.

The dividend as I have noted, is not insignificant with $.68/share being the forward dividend payment yielding 3%.  The company does pay out a significant portion of its earnings in dividends with a 79% payout ratio.  The company last split its stock May, 2007, when it declared a stock dividend to effect a 3:2 split.

Looking at a recent "point & figure" chart from StockCharts.com on Meridian, we can see that the stock made a terrific move higher between August, 2006, when the stock was trading at $12 to a peak of $35 in April, 2008.  The stock sold off with the rest of the market dipping to a recent low of $15.00 in April, 2009, only to rally past recent resistance and currently trades at $22.63/share. The stock does not appear currently over-extended relative to its apparent consolidation over the past two years of its big move in 2007.

To summarize, Meridian (VIVO) is a timely stock with an interesting diagnostic product line that may benefit from the current Swine Flu pandemic hitting our nation.  They have been a consistent performer with steadily increasing revenue, earnings, and even dividends.  The company is financially solid with positive and growing free cash flow and an impressive balance sheet.  If anything, the company is priced a bit rich but with the sideways move the stock price has been making the past two years, and the recent strength it has shown, it may well be a timely stock to consider.

Thanks again for stopping by and visiting my blog.  If you have any comments or questions, please feel to leave them right here on the website or drop me a line at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

Earlier this week (10/20/09) I sold my 50 shares of Coca-Cola (KO) at a price of $53.38 and purchased 48 shares of Church & Dwight (CHD) at a price of $55.61.  As part of my own "trading transparency", I wanted to share with you my own thoughts behind this decision and update you regarding my current strategy.

There is no doubt in my mind that Coca-Cola (KO) remains one of the top international brands of 2009 and of all time! Like my own admiration for Colgate Palmolive (CL) that I have written about previously, I would like to add Coke to my portfolio again some time in the future.  However, this week the company announced 3rd quarter results that were a little 'flat' and the market responded with a pull-back in the stock price. 

During the quarter worldwide case volume grew 2% including 37% growth in India as well as a 15% growth in China.  In North America, however, sales slipped 4% with a 5% dip in soft drink sales.  Perhaps more importantly the company failed to meet expectations of $8.11 billion in revenue, coming in instead at $8.04 billion (down from $8.39 billion the prior year).  Earnings of $.81/share were also flat with last year's $.81 but did meet estimates according to Thomson Reuters.

O.K. it wasn't that bad.  But the stock has had a big move to the upside and with the bit of a disappointment, it seemed vulnerable to a correction.  In fact, we can see this in the latest 'point & figure' chart from StockCharts.com: 

The stock has a great deal of support in the $40-$42 range technically, but wouldn't you view the chart with the recent rise from $43 to a high of $55 over the last 5 months a bit vulnerable to retracement?  Anyhow, that was my thought and I pulled the plug on Coke.

But what do do with the proceeds?  One of the more recent stocks I have reviewed here on Stock Picks Bob's Advice is Church & Dwight (CHD), another consumer company that might be considered a reasonable replacement for a stock like Coke.  As I wrote above, I purchased 48 shares of Church & Dwight on 10/20/09 at a price of $55.61.  As I write, CHD is trading at $55.35, so I am a few cents under my purchase price.

On August 4, 2009, Church & Dwight reported 2nd quarter results.  (They should actually be reporting their 3rd quarter numbers soon as it has been almost 3 months since that report!) During the second quarter revenue climbed 5% to $623.1 million from $594 million the prior year.  Earnings came in at $58.2 million or $.81/share as compared with last year's $45.8 million or $.66/share.  Perhaps more importantly, analysts had forecast earnings of $.79/share on revenue of $611.5 million according to Thomson Reuters.  Thus, unlike Coke, which met estimates on earnings and missed on revenue forecast, CHD exceeded both of these estimates.

In addition, the company raised guidance for full-year earnings from $3.30 to $3.35/share to $3.35 to $3.40/share.  Analysts had been predicting $3.36/share. If that wasn't enough the company also cast a strong vote on the financial strength of the company by significantly increasing their dividend from the former payment of $.09/share to $.14/share.

Thus in one single announcement, the company did what I have lightly referred to a trifecta-plus!  That is they reported strong earnings and revenue numbers that beat expectations on both, they went ahead and raised guidance, and then to top that off increased the dividend as well! 

On a technical basis, Church & Dwight (CHD) is far from over-extended unlike that chart on Coke which gave me some short-term concerns.  If we look at the 'point & figure' chart on CHD from StockCharts.com, we can see that this stock had a tremendous increase from $18.50 in February, 2003, to a peak of $65 in September, 2008.  After dipping as low as $46 in March, 2009, the stock has been fighting higher but overall has spent about a year in this $46 to $65 range consolidating.

One of the things that confirmed my choice of Church & Dwight (CHD) was the beautiful financial picture as reported by Morningstar.com.  Looking at the "5-Yr Restated" financials on Morningstar, we can see the perfect pattern of steady revenue growth from $1.46 billion in 2004 to $2.42 billion in 2008 and $2.48 billion in the trailing twelve months (TTM), the steady increase in earnings from $1.36/share in 2004 to $3.00 in the TTM, the modest growth in outstanding shares from 68 million in 2004 to 71 million in the TTM, the steady growth in free cash flow from $139 million in 2006 to $400 million in the TTM, and the strong balance shee with $357.0 million in cash and $481.0 million in other current assets balanced against current liabilities of $500.9 million.

Reviewing Yahoo "Key Statistics" on Church & Dwight, we can see that the market cap is a mid cap $3.89 Billion, the trailing p/e is modest at 18.41 with a forward p/e (fye 31-Dec-10) estimated at 14.41.  Thus, the PEG (5 yr expected) works out to a satisfactory 1.35.

Yahoo reports 2.52 million shares out short as of 9/25/09, representing a short ratio of 6.1 a bit more than my own 3 day arbitrary rule for 'significance'.  The dividend of $.56 results in a 1% yield which is well covered with earnings with only a 12% payout ratio. The last stock split was back in September, 2004, when the company had a 3:2 split.

As I noted above, the company just posted an announcement that 3rd quarter results are set for November 3, 2009, so there could be some volatility in the stock price around this announcement depending on how the company does relative to expectations and unknown 'whisper' estimates. Stay tuned.

Meanwhile, I have chosen to swap from the fizz of Coke to the stabilizing influence of Arm & Hammer Baking Powder, the brilliance of Brillo, and the safety of a First Response Alarm!  I hope that this swap makes sense and continues to work for me in this continuing to be challenged market environment.

Thanks again for visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

I wanted to let all of you know that I posted a new podcast on ResMed (RMD) this evening, going over my recent post on this stock.

You can click HERE to access my podcast page and download or play the podcast directly. 

If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

As one of my basic strategies for dealing with my investments and managing my cash and equity balances, I utilize predetermined sale points for all of my holdings both on the upside and downside after an initial purchase.  Sales on appreciation are considered "good news" and generally result in a purchase of a new holding.  This is contrasted with sales on the downside, which I refer to as "bad news" signals that result in a shift from equity into cash.

Earlier today my holding in Walgreen (WAG) reached a first appreciation target--a gain of 30% in stock price after an initial purchase and I sold 1/7th of my holding.  I purchased 77 shares of Walgreen in my Trading Account on March 27, 2009, at a cost basis of $26.73/share.  I sold 11 shares of Walgreen (WAG) today at $34.75 for a gain of $8.02 or 30% since purchase.  Since I currently ownly hold 6 positions, well under my maximum of 20 holdings, this sale on "good news" generated a purchase signal for me, and I added a new position into my trading account.

Recently I have been refining my purchases of positions trying to address the question of not only what and when to buy but to deal with the matter of 'how much'?  This question became apparent when my portfolio, during the worst part of the correction, dipped to a minimum of 5 holdings.  As these occasionally needed to be sold on losses, and yet reflecting my own desire to maintain a minimum of 5, I needed to address the problem of replacing losing holdings with similarly sized holdings in spite of their sale on 'bad news.  Initially I chose to replace them with holdings 50% of the average of the other positions.  Subsequently I have decided that 80% or 4/5 of the size of the remaining holdings made reasonable sense to me.

However, with a shrinking position size, conversely I needed some approach that would enable me to increase the size of these downsized holdings as the market improved so that new positions would be more 'normal' in value.  Thus, I have chosen to add new holdings at a level of 125% of the value (5/4) of the other positions held in the portfolio.  You can see that as a market firms, my new positions will continue to grow in size; when the market is very weak, my replacement holdings will diminish in value.

With my buy signal in hand, I chose to purchase 52 shares of McDonalds Corp (MCD) at a price of $56.18.  I recently reviewed this company but would like to touch on some of the updated financial underpinnings to this decision.  Unfortunately for me I purchased shares just before the Fed announced its decision to leave short-term interest rates unchanged at near zero, but commented that economic activity had "picked up" since the last Fed meeting in August.  As should be expected, the skittish market understood good news to be bad news and sold off shares.  Somehow, any comment that things had "picked up" was enough to convince an inflation bear that interest rates would be heading higher soon.  Although there appears to be little in the announcement to justify that assessment.

In any case, McDonald's (MCD) closed at $55.54, down $(.27) or (.48)% on the day, a bit under my own purchase price at $56.18.

Much has been written about McDonald's being "recession-resistant".  We do know that the recession has hit upscale restaurants hard!  Recently The Motley Fool labeled McDonald's as "recession-resistant". Intuitively, I view McDonald's as the high-quality, clean-store, good-value and consistent product offering that also represents comfort foods in this rather uncomfortable time of steep unemployment numbers and economic slowing.

But let's get back to McDonald's and why I like it as an investment.

The latest quarterly report came in July 23, 2009 as reported.  The company's earnings actually dipped to $1.09 billion or $.98/share down from $1.19 billion or $1.04 billion in the year ago period.  Revenue would have actually climbed 4% except for currency fluctuations.  The company beat expectations of earnings of $.97/share (they reported $.98) but missed expectations on revenue of $5.7 billion (they reported $5.65 billion).

Interestingly, it was a strong dollar that led to adjustments in revenue.  When local currency remains stable and the dollar soars, each unit of foreign currency means less dollars reported. If the converse is true, then global revenue should be increasing in the next report due to dollar weakness. Of course, I am not a currency expert, but it could make one wonder!  In fact as this article noted:

"Stifel Nicolaus & Co. analyst Steve West told investors that the August results were worse than anticipated, but he expected further benefits in foreign exchange rates would help McDonald's overcome any weakness in the monthly metric."

However, the company continues to do well globally.  These same-store sales results are reported in local currency, and represent consumer interest in the product. As reported:

"Same-store sales - or those at outlets open at least 13 months -- rose 4.8%, including a 3.5% rise in the U.S. Europe was up 6.9% and the Asia/Pacific, Middle East and Africa rose up 4.4%."

Longer-term, except for the recent dip in revenue, the "5-Yr Restated Financials" on Morningstar are impressive.  Revenue has climbed from $19 billion in 2004 to $22.5 billion in the trailing twelve months (TTM).  Earnings have increased from $1.79/share in 2004 to $3.77/share in the TTM.  The company pays a nice dividend and has grown it from $.55/share in 2004 to $1.88/share in the TTM.  The company appears to have a reasonable cushion on its dividends with a payout ratio of 50%.

Outstanding shares have been held steady with 1.27 billion in 2004, declining to 1.13 billion in the TTM.  Free cash flow continues to be strongly positive with $2.6 billion in 2006 in creasing to $3.6 billion in the TTM.

The balance sheet appears reasonable with $3.6 billion in cash and other current assets compared with the $2.8 billion in current liabilities.  The company does have significant long-term debt reported at $13.1 billion.

Checking the Yahoo "Key Statistics" we can see that this is a 'large cap' stock with a Market Capitalization of $60.61 billion.  The trailing p/e is 14.72 and the p/e is moderate at 14.72.  The PEG is a tad rich at 1.59. 

There are 1.09 billion shares outstanding and only 10.28 million shares out short representing 1.3 trading days of volume (the short ratio).  The company pays a forward dividend of $2.00/share yielding 3.6%.  The last stock split was more than 10 years ago, a 2:1 split on March 8, 1999. 

Taking a quick look at a 'point & figure' chart from StockCharts.com,  we can see that the stock moved strongly higher from $25.00/share in June, 2005, to a high of $64 in August, 2008.  Over the past year it has traded in a tight range between a low of $45 and $62.  It appears to have found a new level of support and does not appear over-extended.

To summarize, my Walgreen shares hit a first partial sale point on the upside triggering a 'buy signal' in my own trading strategy.  The small portion of Walgreen (WAG) was sold and a new position in McDonald's (MCD) was established at a slightly larger size than my other positions as was indicated. 

I like McDonald's both from its well-established brand, its ability to innovate in a mature market, its reasonable valuation and its solid dividend.  I believe we are still working ourselves out of a rather severe recession and that the value both in the stock and the product it sells will play out well for me.  Now, if I can only avoid super-sizing any fries, I shall not have to worry about my ever-struggling diet :).

Thanks for stopping by!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob