Sunday, September 15, 2013

"Let's talk about a company that has a monopoly on a whole market segment -robotics- in our country's fastest growing industry segment -medical devices. The business media hates this one, but I love the stock of Intuitive Surgical and their DaVinci Robotic System"

Dow Jones Industrial Average 15,376 (UP)  Week ending 09-13-2013

Sometimes when investing in stocks, you have to look at a company's strategic assets and its position in its market segment rather than what is happening quarter by quarter with sales and earnings. In the medical equipment segment, there are lots of companies from which you can purchase endoscopes, surgical microscopes and C-ARMS. But if you want to buy Robotic equipment with which to do minimally invasive surgery, there is only one company in the world that you can buy it from and that company is:

Intuitive Surgical Corp. (Symbol ISRG, $375.00)

 The two greatest inventions in Medicine in the last 50 years in my opinion are the mapping of human genes to develop medicines to fight diseases and the invention of the DaVinci robot for doing minimally invasive surgery both on site and remotely. The benefit of  minimally invasive surgery is that recovery times are dramatically reduced for the patient.

The price of the stock of Intuitive Surgical has been knocked down in the last 6 months because of a quarterly revenue and earnings miss, a problem with some of the instruments that hook to the robot, and an FDA investigation about robotic surgery: All short term events that can be resolved and the company will move forward from. ISRG stock is coming off a high of $585.67, so there is a lot of headroom here to run up.  At no time have annual earnings been down.

Here are some numbers for the company.
First, the Revenues TTM are $2.337 billion dollars annually. The market cap on the stock with this low price in place is only 14.89 Billion dollars.  So basically a company, for example GE , could come in and purchase the entire company and own this whole market segment for $20-$25 billion dollars.  As a comparison, Verizon just purchased from Vodaphone only a 45% stake in the part of the VZ Wireless company they did not own for a healthy $130 Billion dollars. So this would be a prime strategic asset with a #1 market position.

 There is one other surgical company in the robotics segment that focuses only on the orthopaedic surgery market, MAKO Surgical (Symbol MAKO, $16.22) , but they have not made any profit yet, and are no threat to Intuitive Surgical's devices. With the DaVinci Robotic unit, the physician can do the surgery in 3D. They can also do the surgery remotely from a separate working console.

 ISRG has a PEG ratio of 0.9858 and a Return on Equity of 20.12, so well within my investment parameters. The median PE is 21.83. The company produced Free cash flow of $164.10 million dollars. The company does not pay a quarter dividend.

The company operates at Gross Profit Margins of 70.04% and at Net Profit Margins of 27.5%. The earnings for 2013 are projected at $15.79 per share and for 2014 they are looking like $17.41 per share.

The company reports earnings on 10-15-2013. The quarter is not supposed to be stellar. So you might want to buy a small amount of shares here then some after the earnings report.  This is a stock you buy 5 or 10 shares at a time. CNBC said reporting on some stocks, that if you had bought ISRG the same day as Google came public you would now be up 1400 + %

Think Strategically for deploying your capital among stocks. This one will be a winner!

Have a good night,          


  1. Good to have you back Dave!
    I missed your postings.

  2. Good afternoon Mike. Thanks for commenting and noticing that I was on break. Hope all is well with you and NMRX. Is that a picture of you and your wife in Paris? I will try to find some less $$ expensive stocks to blog on but at $375.00 this stock is not expensive. Tell everyone I said hello and still think about you folks down in Atlanta. Maybe I will get down to a medical show in Atlanta some time. Talk to ya, Freewilly