We are in a bear market. And you are seeing a bear market rally that can turn anyone into an optimist. Some of the greatest quote about bear market rally can be found in a lot of the Dow Theorists' writing. Therefore, if you plan on investing your hard earn money in this market, be aware of the risk you are taking as the market can fall much faster than it can rise.
From now on, I will emphasize the fact that I, as an investor, often invest in common stock and not preferred stock. One should understand the different between the two. To learn more, click common or preferred.
I enjoy searching for companies with good fundamental that may have been miss priced by the market. It is often easier said than done, but I believe this is where the big gain can be had. One company I came across was Meridian Bioscience Inc. (ticker VIVO). A brief summary of what they do is provide medical devices such as diagnostic equipments. You may think of them as a smaller Abbot Lab. As a matter of fact, Abbot is one of their competitor. To find out more about Meridian click here.
Fundamentally, Meridian is solid. They carry no debt, produces free cash flow, and have a strong dividend history. The most striking aspect of my finding was that the company was able to pay dividend consistently while raising them at an amazing compound annual growth rate of 23%! This compare to 10% growth rate of Abbott Lab. An amazing stats doesn't come without its risk. At current dividend payout of $0.68, it has a payout-ratio of 74%. You ask, what is the significant of this? Let me show you an example.
We all know that S&P 500 did nothing in 10 years so let's see where Meridian and Abbott did.
Abbott:
If you purchase the stock at 52wk high of $53.31 in 1999 (price adjusted for split) and sell it at the low of $44.1 in 2009, you have a loss of 17%. Dividend went from $0.66 to $1.44, a 118% rise!
Together, you have a loss of 16%. By the end of 2009 low, you have a 3% yield! (1.44/53.31)
Meridian:
If you purchase the stock at 52wk high of $3.89 in 1999 (price adjusted for split) and sell it at the low of $17.10 in 2009, you would land a crazy 340% return. Dividend went from $0.09 to $0.68, a whopping 665% rise!
Together, you have a gain of 347%. By the end of 2009 low, you have a 17% yield! (0.68/3.89)
May be it is the law of small number (or big number), but how is it possible that a current small cap company like Meridian ($682M) can sustain such an amazing track record? I don't know.
All I know is that, it did. Many analyst urge you to "see where the company is going", well I don't have a crystal ball and frankly it is just too hard. Meridian compare to a person would have a credit score of 760 and thus I will surely have my money with Meridian.
Think about forecasting for a second. When you go to a bank to get a loan, the most important thing is your past record. They are less concern about your potential to earn. I believe it is just easier to do the same with an investment.
Sorry, no chart today.
Art
From now on, I will emphasize the fact that I, as an investor, often invest in common stock and not preferred stock. One should understand the different between the two. To learn more, click common or preferred.
I enjoy searching for companies with good fundamental that may have been miss priced by the market. It is often easier said than done, but I believe this is where the big gain can be had. One company I came across was Meridian Bioscience Inc. (ticker VIVO). A brief summary of what they do is provide medical devices such as diagnostic equipments. You may think of them as a smaller Abbot Lab. As a matter of fact, Abbot is one of their competitor. To find out more about Meridian click here.
Fundamentally, Meridian is solid. They carry no debt, produces free cash flow, and have a strong dividend history. The most striking aspect of my finding was that the company was able to pay dividend consistently while raising them at an amazing compound annual growth rate of 23%! This compare to 10% growth rate of Abbott Lab. An amazing stats doesn't come without its risk. At current dividend payout of $0.68, it has a payout-ratio of 74%. You ask, what is the significant of this? Let me show you an example.
We all know that S&P 500 did nothing in 10 years so let's see where Meridian and Abbott did.
Abbott:
If you purchase the stock at 52wk high of $53.31 in 1999 (price adjusted for split) and sell it at the low of $44.1 in 2009, you have a loss of 17%. Dividend went from $0.66 to $1.44, a 118% rise!
Together, you have a loss of 16%. By the end of 2009 low, you have a 3% yield! (1.44/53.31)
Meridian:
If you purchase the stock at 52wk high of $3.89 in 1999 (price adjusted for split) and sell it at the low of $17.10 in 2009, you would land a crazy 340% return. Dividend went from $0.09 to $0.68, a whopping 665% rise!
Together, you have a gain of 347%. By the end of 2009 low, you have a 17% yield! (0.68/3.89)
May be it is the law of small number (or big number), but how is it possible that a current small cap company like Meridian ($682M) can sustain such an amazing track record? I don't know.
All I know is that, it did. Many analyst urge you to "see where the company is going", well I don't have a crystal ball and frankly it is just too hard. Meridian compare to a person would have a credit score of 760 and thus I will surely have my money with Meridian.
Think about forecasting for a second. When you go to a bank to get a loan, the most important thing is your past record. They are less concern about your potential to earn. I believe it is just easier to do the same with an investment.
Sorry, no chart today.
Art
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