Meridian Funds

Meridian Funds

Last Update: 08-31-2013

Number of Stocks: 149
Number of New Stocks: 15

Total Value: $2,681 Mil
Q/Q Turnover: 13%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Meridian Funds Watch

  • Meridian Funds Comments on Heritage-Crystal Clean

    Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) has been a solid, long-term performer, but pulled back during the period in response to declining oil prices. One of the reasons we were originally attracted to this environmental services company is the recurring revenue stream generated by its parts cleaning business. However, Heritage-Crystal Clean also provides a used oil collection service and operates an oil re-refinery. The company is successfully lowering input costs in this business, recently transitioning from paying customers to collect and dispose of used oil to charging for this service. Heritage then re-processes the used oil it collects and sells it as new motor oil. We believe this segment of the business shows considerable promise, and have been adding to the position.

      


  • Meridian Funds Comments on Roadrunner Transportation Systems

    Roadrunner Transportation Systems, Inc. (NYSE:RRTS), a leading transportation and logistics service provider, declined along with other transportation service providers. Weak freight markets, a more competitive pricing environment, and an increase in accidents worked against Roadrunner, causing it to miss third-quarter earnings expectations. The company also took a one-time charge after discontinuing a lease-guarantee program designed to attract owner-operators. We believe Roadrunner’s position as the low-cost provider in this space will enable it to successfully weather the competitive pricing environment, which we expect will be short-lived. In addition, the company is gaining market share and enjoying double-digit returns on acquisitions. We opted to hold onto this stock while closely monitoring fundamentals.

      


  • Meridian Funds Comments on Pacific Biosciences of California Inc.

    Pacific Biosciences of California Inc. (NASDAQ:PACB) is a leader in the field of next-generation gene sequencing technology. In October, the company unveiled the Sequel™ System, a gene-sequencing platform that is smaller and less expensive than the Pacific Bioscience’s former gene sequencer. This groundbreaking technology enables longer and more accurate reads of genomes, and is the result of collaboration with Roche, a health care company with interests in human in vitro diagnostics. Late in the period, Pacific Biosciences received a $20 million milestone payment from Roche for completing the project. We believe this new platform will enable the company to penetrate a larger portion of the broader sequencing market.

      


  • Meridian Funds Comments on Solera Holdings Inc.

    Solera Holdings, Inc. (NYSE:SLH) is a company we’ve followed for several years but were unable to purchase due to the fact that it remained just above the portfolio’s market-capitalization range. However, in July the company’s market cap declined, making it a viable investment for the portfolio. As a provider of risk and asset management software and services to the global automotive industry, Solera is a stable business that is both predictable and defensive in nature. The majority of the company’s revenues are recurring, and it has a strong competitive position, particularly outside of the U.S. where it generates over half of its revenue. In August, Solera’s management announced the sale of the company to private equity firm Vista Equity Partners for $6.5 billion, causing the stock to appreciate. We viewed the increase in Solera’s share price as an opportunity to take profits and trimmed our position.

      


  • Meridian Funds Comments on SolarWinds Inc.

    SolarWinds, Inc. (NYSE:SWI) accepted a $4.5 billion offer to be acquired by two private equity firms, turning it into a homerun for investors. In October, the developer of IT infrastructure management software agreed to be purchased at nearly a 20% premium by Silver Lake Partners and Thoma Bravo. We initiated a position in SolarWinds in 2013 based on our belief that the company would benefit from an increasingly large market opportunity created by a pervasiveness of performance-driven IT infrastructures. We opportunistically added to the position when the stock pulled back and were rewarded by the takeout.

      


  • Meridian Funds Comments on Royal Gold Inc.

    Royal Gold, Inc. (NASDAQ:RGLD) is a precious metals company with royalty claims on gold, silver, copper, lead, and zinc at mines in over 20 countries. While gold performed better than other commodities during the period, the precious metal declined as U.S. monetary policy tightened and the dollar appreciated. Another setback for the company was the deferral of gold from a mine in Chile operated by Barrick Gold, which temporarily stopped construction at the mine. However, we believe Royal Gold has an exceptional business model and we view our investment in the company as a great way to get exposure to gold. The company essentially pays miners upfront for the right to buy their metals later at reduced prices. It has no operational risk because it owns no mines, is a beneficiary of ounces growth, has pricing power, and typically earns an 8% return on a flat price. We have decided to be patient with Royal Gold and maintained a position in the stock.

      


  • Meridian Funds Comments on Exact Sciences Corp

    Exact Sciences Corp. (NASDAQ:EXAC) declined after an independent panel of health care experts excluded the company’s colon cancer-screening test from a list of recommended tests in the U.S. Instead, the panel defined the product as “alternative testing that may be useful in select clinical circumstances.” Marketed as Cologuard, the product is a non-invasive, FDA-approved colorectal cancer-screening test covered by Medicare. It has proven effective at detecting early-stage colon cancer as well as precancerous lesions. When detected early, colon cancer is highly curable. However, Cologuard’s exclusion from the panel’s list of recommended tests may make it more difficult to win favorable reimbursement from private insurers. We consequently liquidated our position in Exact Sciences and used proceeds from the sale to invest in other, more attractive investment opportunities.

      


  • Meridian Funds Comments on California Resources Corp

    California Resources Corp. (NYSE:CRC) is focused solely on oil and natural gas exploration and drilling in California. Our investment in this stock was based on the expectation that U.S. production would soon taper off, resulting in higher domestic oil prices. However, production continued to increase for much longer than we anticipated, forcing management to make production cutbacks, slash capital spending plans, and reduce the number of wells it plans to operate. Another negative for the company was its elevated debt load, which tends to fuel greater volatility in the stock when oil prices fall. We continue to believe California Resources Group is positioned for a rebound when U.S. oil production slows and therefore maintained a position in the stock.


    From the Meridian Equity Income Fund fourth quarter commentary.

      


  • Meridian Funds Comments on Amazon.com Inc.

    Amazon.com, Inc. (NASDAQ:AMZN) continues to move the needle on many fronts, including cloud computing. Amazon Web Services (AWS), which rents computing power and storage for corporate customers, is the leader in this space and continues to strengthen its competitive advantage through major feature releases, more data centers, and price cuts for several of its services. Although AWS recently announced annual revenue growth of approximately 60% and a profit margin of greater than 50%, we believe this segment of the business has much more room to grow. Another positive development for the stock was a significant shift in consumer buying trends during the holiday season as more people chose to do their shopping in the e-commerce marketplace rather than in bricks-and-mortar stores. This shift helped Amazon exceed earning expectations during the third quarter.


    From the Meridian Equity Income Fund fourth quarter commentary.

      


  • Meridian Funds Comments on Clean Harbors Inc.

    Clean Harbors, Inc. (NYSE:CLH) is a provider of environmental, energy, and industrial services, including hazardous waste disposal for companies. The rapid deterioration of oil prices during the period caused Clean Harbors’ re-refining business to suffer. However, we believe the company’s hazardous waste disposal business is its greatest asset. It is extremely difficult for companies to meet Environmental Protection Agency (EPA) requirements and to obtain permitting for new hazardous waste incinerators, giving Clean Harbors a competitive advantage. This business has benefitted from a steady increase in the types of waste classified by the EPA as hazardous. Given the industry’s limited capacity and Clean Harbors’ dominant position in this space, the company has been able to consistently raise prices. We believe investors are too focused on the short-term movement of crude oil prices and not focused enough on the long-term growth potential of this company. We consequently increased our position in the stock.


    From Meridian Growth Fund Semi-Annual Letter to Shareholders 2016.

      


  • Meridian Funds Comments on Wolverine Worldwide

    Wolverine Worldwide, Inc. (NYSE:WWW) is the leading manufacturer of non-athletic footwear in the U.S. Like many other retail companies during the period, Wolverine struggled against a bleak consumer backdrop. The company announced an 18% decline in third-quarter earnings due to inconsistent retail traffic and disappointing re-order patterns from its retail partners. Wolverine owns a broad portfolio of footwear brands including Sperry, Merrell, Keds, and Saucony and manufactures work boots for the military and construction workers. We believe an unusually warm winter and exposure to the oil and gas industry will create headwinds for Wolverine’s winter and work boots. Although we maintain a position in the stock, we are continuing to closely monitor fundamentals.


    From Meridian Growth Fund Semi-Annual Letter to Shareholders 2016.

      


  • Meridian Funds Comments on Roadrunner Transportation Systems

    Roadrunner Transportation Systems, Inc. (NYSE:RRTS), a leading transportation and logistics service provider, declined along with other transportation service providers. Weak freight markets, a more competitive pricing environment, and an increase in accidents worked against Roadrunner, causing it to miss third-quarter earnings expectations. The company also took a one-time charge after discontinuing a lease-guarantee program designed to attract owner-operators. We believe Roadrunner’s position as the low-cost provider in this space will enable it to successfully weather the competitive pricing environment, which we expect will be short-lived. In addition, the company is gaining market share and enjoying double-digit returns on acquisitions. We opted to hold onto this stock while closely monitoring fundamentals.


    From Meridian Growth Fund Semi-Annual Letter to Shareholders 2016.

      


  • Meridian Funds Comments on Dyax Corp

    Dyax Corp. (NASDAQ:DYAX) is a biopharmaceutical company focused on novel therapeutics for patients with rare diseases. One of the things that initially attracted us to this company was its development of a promising new drug for hereditary angioedema, a rare and potentially life-threatening disease that causes swelling. Ireland-based biopharmaceutical company Shire also recognized the potential of this experimental drug and, in November, offered to purchase Dyax in an all-cash deal valued at approximately $5.9 billion—a premium of about 35%. We were pleased to be among the investors who benefited from this lucrative deal.


    From Meridian Growth Fund Semi-Annual Letter to Shareholders 2016.

      


  • Meridian Funds Comments on Solera Holdings Inc.

    Solera Holdings, Inc. (NYSE:SLH) is a company we’ve owned for several years. As a provider of risk and asset management software and services to the global automotive industry, Solera is a stable business that is both predictable and defensive in nature. The majority of the company’s revenues are recurring, and it has a strong competitive position, particularly outside of the U.S. where it generates over half of its revenue. In August, Solera’s management announced the sale of the company to private equity firm Vista Equity Partners for $6.5 billion, causing the stock to appreciate. We viewed the increase in Solera’s share price as an opportunity to take profits and trimmed our position.


    From Meridian Growth Fund Semi-Annual Letter to Shareholders 2016.

      


  • Meridian Funds Comments on SolarWinds Inc.

    SolarWinds, Inc. (NYSE:SWI) accepted a $4.5 billion offer to be acquired by two private equity firms, turning it into a home run for investors. In October, the developer of IT infrastructure management software agreed to be purchased at nearly a 20% premium by Silver Lake Partners and Thoma Bravo. We initiated a position in SolarWinds in 2013 based on our belief that the company would benefit from an increasingly large market opportunity created by a pervasiveness of performance-driven IT infrastructures. We opportunistically added to the position when the stock pulled back and were rewarded by the takeout.


    From Meridian Growth Fund Semi-Annual Letter to Shareholders 2016.

      


  • Meridian Funds Comments on Clean Harbors Inc.

    Clean Harbors, Inc. (NYSE:CLH) provides a variety of environmental remediation and industrial waste management services. The business has high regulatory barriers to entry and roughly three fourths of revenues are recurring in nature. Clean Harbors came across our contrarian screens due to tough comparisons in its comparatively volatile event-driven business and a poorly timed oil recycling acquisition. While our investment thesis largely played out as these businesses have improved, the company has suffered due to significant declines in its oil and gas related businesses. We continue to hold Clean Harbors’ shares due to the defensive nature of its core business and an attractive valuation that ascribes little value to the most energy exposed areas. We expect earnings growth to resume late in 2016 and see this as a potential catalyst for the stock.


    From Meridian Contrarian Fund Semi-Annual Shareholder Letter 2016.

      


  • Meridian Funds Comments on Dick’s Sporting Goods

    Dick’s Sporting Goods, Inc. (NYSE:DKS) is the largest full-line, omni-channel sporting goods store in the US with over 700 stores and an expanding online presence selling an extensive selection of equipment, apparel, footwear and accessories. We invested in Dick’s after the company’s earnings growth slowed due to weakness in its golf business combined with a slowdown in guns and ammunition sales. We believed the company had finally accepted that there is a secular decline in golf and had a solid plan to improve profitability by allocating square footage from golf to more popular product lines and closing many of its specialty golf locations as their leases come up. Gun and ammunition sales were weak against a tough comparable period that had seen strong demand due to worries about increased gun control. Industry data indicated to us that gun and ammunition sales were picking up as the tough comparable period passed. This thesis played out quickly and we initially had gains in our investment and held on to the stock as the company continued to post solid earnings results. During the quarter, however, the company announced that historically warm weather would hurt sales of outerwear and reduce earnings. We continue to hold shares of Dick’s Sporting Goods as we believe it is the best merchandiser in its category, has a compelling and improving online presence, and will benefit from strong market share gains in brick and mortar retail as weaker competitors succumb to the pressure of online competition.


    From Meridian Contrarian Fund Semi-Annual Shareholder Letter 2016.

      


  • Meridian Funds Comments on Verint Systems

    Verint Systems, Inc. (NASDAQ:VRNT) technologies provide collection and analysis of unstructured data including voice, video, email, internet and other data transmissions. Solutions are used for security, interception, surveillance, defense, and customer service and enterprise intelligence. The company is a leader in its markets with competitive advantages derived from a core analytical technology platform that can be applied to different products and end markets. We invested when earnings declined due to significant investment by the company in new products to re-accelerate product development and sales. Verint has been a strong performer for the Contrarian Fund over the 3 years since our original investment. This year the stock has suffered from adverse foreign exchange and cautious guidance due to macro factors. We believe Verint’s end markets remain attractive, and that the company continues to have leading technology and a significant market opportunity for its new cyber-security products. As such we continue to own Verint shares while we confirm this thesis.


    From Meridian Contrarian Fund Semi-Annual Shareholder Letter 2016.

      


  • Meridian Funds Comments on Old Republic International Corp

    Old Republic International Corp. (NYSE:ORI) is a 100+ year old insurance underwriter focused on commercial casualty lines and title insurance. We originally invested in the company after earnings suffered due to (1) higher losses in its workers’ compensation line of business due to medical cost inflation and poorly underwritten policies, and (2) the title insurance segment declined against difficult comparisons relative to the 2012-2013 refinancing boom. The stock performed well for us in 2015 as the company returned to more traditional workers’ comp loss ratios by shifting its book of business to more risk sharing with insureds and away from more competitive coastal geographies, and as the title business enjoyed close to double digit growth in premiums. We continue to hold shares in Old Republic due to its 4% dividend yield and steady results, but have reduced our position due to significant stock price appreciation.


    From Meridian Contrarian Fund Semi-Annual Shareholder Letter 2016.

      


  • Meridian Funds Comments on Microsoft Corp

    Microsoft Corp. (NASDAQ:MSFT) is a global leader in software for PC’s and enterprise computing. The company had struggled for a number of years to find growth outside of its traditional markets, missing out on large opportunities in the social and mobile markets. Last year, shares were hit hard due to weak end markets related to PC’s as well as foreign exchange headwinds. Based on our research, we felt new management was reinvigorating innovation and the company was well positioned to offer compelling cloud-based computing services. In 2015, we began to see the signs of progress in this transformation, with shares propelled by an 80% increase in cloud computing revenue during the September quarter. We continue to hold our shares as the cloud transformation is in its early innings and we think the company has the potential to generate $4 of free cash flow per share within the next 2-3 years.

      


  • Meridian Funds Comments on NVIDIA Corp

    NVIDIA Corp. (NASDAQ:NVDA) is the dominant provider of visual computing technologies used for PC based video games and is expanding into new markets in enterprise computing and automotive. We originally invested in the company after management significantly increased R&D spending in order to enter the mobile, automotive, and enterprise markets. These investments depressed earnings, and investors were initially disappointed with failedproduct launches in cell phones and tablets. However, we view NVIDIA’s technology as highly differentiated, and feel that there are excellent opportunities outside of mobile devices. Stock performance this quarter was driven by another solid earnings report, supported by continued growth in the traditional PC gaming industry and sales of chips for automotive infotainment systems. Based on the market opportunities in auto, and enterprise computing, we continue to hold shares.

      


  • Weitz Funds Comments on ADT Corp.

    Much of our initial ADT (NYSE:ADT) thesis, as we outlined in our fourth quarter 2013 Analyst Corner, proved correct, most notably the company’s continued success in attracting customers to its more advanced Pulse home automation services and a muted impact from new competitors in an already highly-competitive market. We did, however, underestimate the pace of investments required to grow the business in the near term, and consequently, our business value estimate had declined modestly since our initial investment. Even though the predictable, subscription-based nature of its cash flows had not changed and management was making the right decisions to improve the long-term health of its business, the stock languished for much of 2013 and declined precipitously in January 2014 in response to shareholders fatigue.

    At these lower prices, ADT shares still traded at a meaningful discount to what we estimated a long-term business owner would be willing to pay for the whole business. Over the next two years, ADT’s shares proved quite volatile as investors alternately cheered and jeered the company’s progress, providing opportunities to add to our holdings under $30, and trim above $40. Then on February 15, 2016, we were greeted with the news that private equity firm Apollo Management Group (owner of ADT’s much smaller competitor, Protection One) had agreed to acquire ADT for $42 per share (a 56% premium to the previous close), a slight discount to our latest business value estimate in the mid $40s and a gain over our average cost of roughly $37.

    Despite initial expectations proving too high, by insisting on investing with a margin of safety, we were still able to achieve a positive outcome. Not every error of estimation has ended, or will end, as favorably, but we believe by sticking to our discipline we can minimize the impact of possible mistakes.


    From Weitz Funds' Annual Overview of the Small/Mid-Cap Strategy.

      


  • Meridian Contrarian Fund Semi-Annual Shareholder Letter

    For the six months ended December 31, 2015, the Meridian Contrarian Fund Legacy Class shares returned (7.37)%, outperforming the Russell 2500 Index, which returned (7.66)%.

      


  • Meridian Growth Fund Semi-Annual Letter to Shareholders

    For the six months ended December 31, 2015, the Meridian Growth Fund Legacy Class shares declined (8.90)% underperforming its benchmark, the Russell 2500 Growth Index, which declined (7.66)%.


    After a strong start in 2015, small cap stocks reversed course in the second half of the year, ending the period in negative territory. Market volatility was fueled by a sharp decline in oil prices, continued weakness in China, deteriorating commodity prices, and anxiety over a potential increase in U.S. interest rates, which finally transpired in December.

      


  • Meridian Funds' Undervalued Stocks With Growing Earnings

    Meridian Funds is a long-term small-cap investment firm with several mutual fund strategies. The firm was founded by the late Richard Aster Jr. 


    The following are the most undervalued stocks in Meridian's portfolio that have growing EPS over the last five years.

      


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