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 read with interest when another one of my 'old favorites' showed up the other day on the top % gainers lists on the back of a terrific earnings announcement.  Research in Motion (RIMM) closed at $70.00, up $6.54 or 10.31% on December 18, 2009.  I do not own any shares of this stock.

RIMM has been an early favorite of mine, having first written up Research in Motion on this blog on September 26, 2003, when the stock was trading at $38.24.  Adjusted for a 2:1 split in June, 2004, and then a 3:1 stock split in August, 2007, this workes out to a split-adjusted 'pick price' of $6.37. With Friday's close at $70.00 this works out to an appreciation of $63.63 or 999% since writing up the stock.

I revisited Research in Motion (RIMM) on August 19, 2007, when the stock was trading at $220.52. Adjusted for the 3:1 stock split a couple of days after posting this entry, the stock pick was made at a split-adjusted price of $73.51, so RIMM has essentially traded sideways since that point, and is actually a few dollars lower than the blog entry of 2007.

Let's again revisit this stock and look at the latest earnings, the fundamentals underlying this stock, some valuation numbeers, and a 'point & figure' chart.

On December 17, 2009, Research in Motion announced 3rd quarter results. For the quarter ended November 30, 2009, net income was reported at $628.4 million or $1.10 per share, upsharply from net income of $396.3 million or $.69 per share the prior year. Revenue climbed 41% to $3.92 billion in the quarter.

Equally important the company beat expectations for the quarter which according to FactSet Research were for earnings of $1.04 per share on revenue of $3.78 billion.

The company shipped 10.1 million smartphones in the quarter with net new subscribers of 4.4 million.  This also exceeded expectations of 9.5 million in shipments with 4.1 million new subscribers.

To top off the earnings report, RIMM raised guidance for the upcoming quarter to sales of $4.2 billion to $4.4 billion, up from prior guidance of $4.0 to $4.03 billion. This is also ahead of analysts' expectations of $4.1 billion.

Profits was guided to $1.21-$1.31, also ahead of prior guidance of $1.00-$1.08 and also ahead of analysts' expectations for $1.12 in earnings.

Let's take a look at the longer-term results as reported on the Morningstar.com "5-Yr Restated" financials page on RIMM.  Here we can observe the steady growth in sales from $1.35 billion in 2005 to $11.1 billion in 2009 and $13.2 billion in the trailing twelve months (TTM).  Earnings have also steadily grown from $.36/share in 2005 to $3.30 in 2009 and $3.55/share in the TTM.

Outstanding shares have been stable and actually have declined due to company buy-backs.  In 2005, there were 587 million shares which dropped to 574 million by 2009.  Free cash flow has been positive and has increased from $482 million in 2007 to $1.05 billion in the TTM.

Looking at the balance sheet, we can see that RIMM has $1.08 billion in cash and $4.13 billion in other current assets.  This total of $5.21 billion in cash and other current assets, when compared to the $2.17 billion in current liabilities works out to a Current Ratio of 2.4.  The company has almost no long-term liabilities with $71.1 million only reported on Morningstar. According to Morningstar, RIMM sells with a forward p/e of 16.1. Fidelity has RIMM with a trailing p/e of 19.8 and the stock does not pay a dividend.

If we examine a 'point & figure' chart on Research in Motion (RIMM) from StockCharts.com, we can see that the stock price is very volatile.The stock traded as high as $148 in June, 2008, only to dip as low as $36 in December, 2008 through March, 2009.  The stock is still trading below resistance lines but appears to be moving bullishly higher from its prior lows.

To summarize, Research in Motion (RIMM) reported a very strong earnings report with both strong growth in revenue and earnings with numbers that both exceeded analysts' expectations.  To top it off, the company raised guidance for the upcoming quarter also above analysts estimates.

Longer-term, the company has steadily and rapidly grown earnings, revenue, and free cash flow while maintaining and reducing outstanding shares.  However, they do not and haven't paid cash dividends.  Their balance sheet is solid with a current ratio of over 2 and nominal long-term debt.   The stock chart demonstrates the high volatility of this stock which appears to trade with a high beta. Valuation does not appear excessive in the high teens with the incredible record of growth this company has reported.

Perhaps a better question is the performance of the RIMM smartphone platform with the iPhone from Apple (AAPL), and the Google Droid phone by Motorola (MOT) sponsored by Verizon (VZ).  Apparently all three of these platforms have been taking share from Windows Mobile-based phones.  With smartphones representing only 18% of all cell phones, there appears to be room for growth for all three major platforms.

RIMM deserves a spot in my blog if not eventually a spot in my own trading portfolio!  For now, I shall wait for my own holdings to either reach an appreciation target allowing me to purchase a new holding or dip so that they need to be sold completely.  I continue to utilize my own portfolio to literally direct my actions in the market.

Thanks again for visiting!  If you have any comments or questions, please feel free to leave them right on the website 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 put together a podcast this evening on Medtronic (MDT).  Please click HERE to listen to me discussing my recent entry and a poem by Carl Sandburg!

If you have any comments or questions, please feel free to leave them on the website 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.

After shrinking for four straight quarters, the U.S. GDP expanded by 2.8% in the 3rd quarter, reversing the longest straight decline for the usually robust United States economy since the Great Depression of the 1930's. Even so, the economic recovery remains fragile.  Latest figures from the post-Thanksgiving "black Friday" shopping suggest that while individual spending dipped 8% per person, total weekend spending actually climbed 0.5% from last year.

On the jobs front, all we see is that the rate of decline is diminishing, lending hope that an improvement may actually be seen in the not-too-distant future.  However, news that initial jobless claims came in at 466,000 last week is only good news from the perspective that this was the lowest level since September, 2008. It is still hard in absolute terms to become very excited about the news that another 1/2 million Americans are submitting new claims for unemployment!

Meanwhile gold is soaring to near-record levels hitting $1,136.80/ounce on Friday after pulling back in the face of the Dubai World events.  On top of this the dollar has shown continued weakness, dropping to a 14 year low against the Yen as the Fed continues to utilize rock-bottom interest rates to try to kickstart the economy.  In spite of the slowly turning economy in the United States, politicians like Ron Paul are seeking to exert more influence over the machinations of the Fed.  Meanwhile, Bernanke and the Fed are trying to fight back to retain independence.

To top it off there is now talk of a second stimulus while the effects of the watered-down first stimulus, most still unspent, is debated.

In spite of all of this, I agree with Warren Buffett, probably one of the wisest investors of the century, who is still bullish on America's Future.  (Watch Warren Buffett on YouTube here.)

With all of that in mind, I do not believe that many of the companies we look for on this blog will go out of business and that the stock market will never recover. 

I continue to look for quality companies reporting good earnings with good track records.  One such company is Medtronic (MDT), a stock that I first reviewed six years ago, on November 13, 2003 (excuse my 'title' which mistakenly says 2002.) I do not currently own any shares of Medtronic (MDT) but my wife does own a few shares (amounting on one year's contribution) to her IRA that she purchased several years ago.  Medtronic (MDT) closed at $42.99 on November 27, 2009, down $(.19) or (.44)% on the day.

According to the Yahoo "Profile" on Medtronic (MDT), the company

"...develops, manufactures, and sells device-based medical therapies worldwide."

These devices address cardiac rhythm problems, neuromodulation treatment, diabetes treatment, surgical treatment and physio-control equipment.

Medtronic made the news last week after reporting surprisingly strong 2nd quarter 2010 results.  Revenue for the quarter came in at $3.84 billion, up 8% from last year's $3.57 billion.  Earnings for the quarter came in at$868 million or $.78/share in the quarter ended October 30, 2009, up from $547 million or $.48/share the prior year.  Adjusted income was $850 million or $.77/share.

Financial results should never be reviewed 'in a vacuum'.  It certainly is important whether the company reports positive or negative growth, but at least as important is the expectations that were held by analysts and others regarding the event as the event itself.  In this case, analysts had been expecting revenue of $3.75 billion and Medtronic exceeded expectations coming in at $3.84 billion.  In terms of the earnings figure, analysts had expected earnings of $.74/share, and the company again exceeded these expectations with its $.77/share (adjusted) result!

In today's difficult economic environment, fewer companies are offering earnings guidance, so for a company like Medtronic (MDT) to not only offer guidance, but also to raise guidance to a range of $3.17 to $3.22 a share, from prior projections of $3.10 to $3.20/share ahead of analysts forecasts of $3.15/share is also quite encouraging. 

In general, I prefer to identify companies that have uninterrupted revenue and earnings growth for inclusion in this blog.  But it would be inopportune to ignore companies like Medtronic (MDT) which have indeed experienced a dip in recent financial results in the face of a global slowdown rivaling the Great Depression, yet now appear to be returning to their regular pattern of growth.  These are companies that need to be identified by a successful investor.

Reviewing the Morningstar.com "5-Yr Restated" financials on Medtronic (MDT), we can see that revenue growth has been steady from $10.1 billion in 2005 to $14.6 billion in 2009 and $14.8 billion in the trailing twelve months (TTM). Earnings grew steadily from 2005 at $1.50/share to 2007 when they reported $2.40/share.  However, since that time earnings have dipped to $1.93/share in 2009 and $1.69/share in the TTM.  However, with the current report discussed above, hopefully, this trend is being reversed.

Medtronic (MDT) has continued to pay dividends and to increase that payment regularly without interruption from $.34/share in 2005 to $.75/share in 2009 and $.77/share in the TTM.  Outstanding shares have been tightly controlled and actually reduced with 1.2 billion in 2005, graduallly decreased each year to 1.12 billion in the TTM.

Free cash flow has been positive and increasing (except for a mild dip in the TTM) from $2.4 billion in 2007 to $3.38 billion in 2009 (and $3.18 billion in the TTM).

The balance sheet appears solid with $1.0 billion in cash and $6.3 billion in other current assets with only $3.1 billion of current liabilities yielding a 'current ratio' of 2.35.  Morningstar reports the company with another $7.3 billion in long-term liabilities.

In terms of valuation, looking at the Yahoo "Key Statistics" on MDT, we find that this is a large cap company with a market cap of $47.58 Billion.  The company sells with a trailing p/e of 21.65 with a forward p/e of 12.28.  Even with the relatively 'rich' valuation of its p/e, the PEG ratio (5 yr expected earnings) comes in at a reasonable 1.24 (from my perspective).

Yahoo reports 1.11 billion shares outstanding with 1.10 billion that float.  As of November 13, 2009, there were 13.74 million shares out short representing only 2 days of average trading volume, below my own arbitrary 3 day rule for significance for the short interest ratio.

The company pays a forward dividend rate of $.82/share with a forward annual dividend yield of 1.9%.  The payout ratio is a fairly 'safe' 40%, and the last stock split was a 2:1 split more than 10 years ago paid in September, 1999. 

Finally, if we take a look at the Medtronic (MDT) 'point & figure' chart from StockCharts.com, we can see that the stock was trading in a fairly tight range between $41 and a high of $56 (that it hit three times) before turning lower in October, 2008, along with the rest of the market, to bottom at $24/share in February, 2009.  The stock has rallied strongly since, and hit a recent level of $43/share last week before pulling back a bit on Friday.

To summarize, Medtronic (MDT) appears to be recovering and regaining some of its previous growth characteristics that suffered during the recent economic slowdown. They reported a terrific quarter and expressed optimism about the future by raising guidance.  Longer-term, they have continued to grow their revenue while experiencing a mild set-back in earnings, increased their dividend, and have retired shares on a regular basis.  They have outstanding free cash flow growth, a solid balance sheet, and a chart that is looking more optimistic.

On a Peter Lynch level, with an aging population struggling with obesity, heart disease numbers may well soar, and recently predictions of a doubling of diabetes victims have recently been announced.  Against all of this is the perceived threat of healthcare reform that may introduce more regulation into healthcare in America but will also bring 30 to 40 million new patients into doctors' offices and hospitals.

I do not own any shares of MDT now, but this is the kind of stock I would be purchasing if I had the 'signal' from my own portfolio to be buying shares in a new holding.

Thanks again for stopping by and visiting my blog!  If you have any comments or questions, please feel free to leave them right on the website 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 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