02 Mar 2009 Meridian Value Fund - Q4 2008 Report ( Portfolio )
Our investment strategy remains unchanged. We continue to seek out-of-favor companies that we believe have defensible positions in their industries, strong or improving balance sheets, reasonable valuations and good prospects for earnings growth. Due to the market drop and weak economy the number of candidates meeting our investment requirements has increased significantly. It is our position that over the long term this strategy will produce returns that outperform the Fund’s benchmark. We believe the portfolio is well positioned, reasonably valued and diversified. We hold 52 positions, representing 26 industry groups. We continue to invest in companies of all market capitalizations and our largest areas of concentration are healthcare products, technology and industrial products. The outlook for our approach, in our view, is favorable at this time.

During the quarter we purchased shares of Commercial Metals Company, Diebold, JP Morgan Chase, Kohl’s, VeriSign and Wells Fargo.

Abbott Laboratories, one of our holdings, is a diversified healthcare company occupying leadership positions in pharmaceuticals, nutritional products, diagnostics and vascular products. Earnings growth stalled in 2006 due to the conclusion of a co-promotion sales agreement and two smaller drugs going generic. Earnings growth resumed in 2007 due to robust growth of Humira; Abbott’s drug for use in arthritis and psoriasis. The successful US launch of Xience V, Abbott’s drug eluting stent, also accelerated earnings growth. Abbott is well positioned with a solid drug pipeline, limited patent expirations and steady growth across its healthcare portfolio. We expect earnings to reach $4.60 per share in the next three years up from $3.32 in 2008. At 11 times normalized earnings and a dividend yield near 3%, we believe the stock is a compelling value, and has defensive characteristics that are attractive in the current economic environment.