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Contributors: Douglas McIntyre Jon C. Ogg

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Wednesday, September 13, 2006

Analyzing an S&P Index Change: Meridian Bioscience

Today shortly after 6 PM an Standard & Poors announced it was making a change in the S&P Small Cap 600 Index. Meridian Bioscience (VIVO) will replace MRO Software (MROI) in the S&P Small Cap 600 Index as of the close on Monday, September 18, 2006. If you will recall, MROI is being acquired by IBM and is expected to close on or about that date.

Traders tend to jump into stocks that are not in the 3 main S&P Indexes that get added fresh into it, at least they do in comparison to the stocks that move up from the S&P Small Cap 600 or S&P Mid-Cap 400. The reason is fairly simple. Index managers tend to manage more than 1 S&P Index fund if they manage an S&P index-pegged fund. That means that they already own many of the shares that they would otherwise have to buy for the fresh addition.

That is why VIVO shares are up 5%, or $1.13, at $23.55 after hours. VIVO has a market cap of $585 million and trades with a 34 P/E ratio. The good news is that the company has been around since the 1970's, so it isn't just a fly-by-night operation. Investors do need to know that this was only a $3.00 stock back in 2001, but its 52-week trading range of $17.42 to $28.00.

It develops, manufactures, and distributes diagnostic test kits primarily for respiratory, gastrointestinal, viral, and parasitic infectious diseases; and bulk antigens, antibodies, and reagents used by researchers and other diagnostic manufacturers, as well as provides contract manufacturing service of proteins and other biologicals for use by biopharmaceutical and biotechnology companies that are engaged in research for new drugs and vaccines. The company’s product technologies include enzyme immunoassay, immunofluorescence, particle agglutination/aggregation, immunodiffusion, complement fixation, and chemical stains. It markets its products to hospitals, reference laboratories, research centers, veterinary testing centers, physician offices, and diagnostics manufacturers in approximately 60 countries worldwide, through direct sales force and independent distributors.

Jon C. Ogg
September 13, 2006
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