Peter Lynch writes a column in Worth magazine. His last column "Use Your Edge" in the March edition is pretty interesting:
worth.com
A lot of what he says in the article applies to Quidel:
Peter wrote, "Computer buyers who can't tell a microchip from a potato chip still could have spotted the Intel inside label on every machine being carried out of the computer stores. Not surprisingly, Intel has been a 25-bagger to date: The company makes the dominant product in the industry." We may not know much about biotechnology, but we know what strep, chlamydia, H.pylori and the flu are. A few years from now people will be saying, "I wish I'd of invested in Quidel when scientists were saying: The discovery that H.pylori is the cause of ulcers and stomach cancer is one of the biggest discoveries of the century." If Quidel doesn't already, it soon will dominate the rapid test market for strep and H.pylori with its CLIA approved tests. Every P&G salesman peddling Helidac will have "Quidel's H.pylori test inside."
Peter wrote, "As the Dow has hit new records week after week, many small companies have been ignored. In 1995 and 1996, the Standard & Poor's 500 Stock Index was up 69 percent, but the Russell 2000 index of smaller issues was up only 44 percent. And while the Nasdaq market rose 25 percent in 1996, a lot of this gain can be attributed to just three stocks: Intel, Microsoft, and Oracle. Half the stocks on the Nasdaq were up less than 6.9 percent during 1996." Quidel's obviously in the pack of ignored stocks. Wall Street will eventually discover the small guys that are generating big E gains. There's just too much spread that's develop between the high priced S&P stocks and the Quidels for Wall Street to ignore them for long.
A couple of Peter's recommendations definitely apply to Quidel:
1. "Buy small companies after they've had a chance to prove they can make a profit." Quidel's last quarter should indicate that it's now solidly in the profit mode.
2. "Enter early -- but not too early. I often think of investing in growth companies in terms of baseball. Try to join the game in the third inning, because a company has proved itself by then. If you buy before the lineup is announced, you're taking an unnecessary risk. There's plenty of time (10 to 15 years in some cases) between the third and the seventh innings, which is where the 10- to 50-baggers are made. If you buy in the late innings, you may be too late." I think Quidel's definitely in the third inning.
Mike |
