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Bought Intuitive Surgical, some thoughts

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February 06, 2009 – Comments (3) | RELATED TICKERS: ISRG

Intuitive Surgical had long been a TMF recommendation. For quite some time, I had thought the stock was overpriced. However, I recently bought around $100 a share.

ISRG's technology is very attractive.  The Da Vinci system is, as most people interested in the stock would know, a minimally invasive technology. The system is being used in an increasing number of procedures. Also, the installed user base is increasing. The firm is generating an increasing amount of revenue from service contracts, which is a stable revenue source.

 The market overreacted to management's relatively weak guidance for 2009. No surprise there. The market had, I thought, overreacted on the upside.

Although health care is adding jobs, a lot of hospitals are still under financial stress. ISRG, being a monopoly, has held the line on pricing, anticipating significant future sales when conditions pick up. I don't think pricesin the $90-110 range are justified unless they experience a prolonged period of zero sales growth.

This is definitely a no-brainer pick.

3 Comments – Post Your Own

#1) On February 06, 2009 at 6:09 PM, DemonDoug (83.12) wrote:

when conditions pick up.

And that would be........................................... when, exactly?

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#2) On February 06, 2009 at 6:57 PM, awallejr (83.26) wrote:

I happen to like ISRG longterm as well.  The liquidity crisis had to have hurt them simply because of the need for financing to purchase their systems.  But their product is considered top-notch and with the continued aging of America, along with the FED's relentless efforts at maintaining liquidity, I think you have a winner.

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#3) On February 09, 2009 at 12:27 PM, weiwentg (99.02) wrote:

DemonDoug: Da Vinci provides significant benefit to patients. An increasing number of hospitals will want to offer it. ISRG has  zero debt, significant cash on hand and no competitors. Additionally, hospitals are generally considered stable businesses. Unless you can tell me that the economy will take a decade to stabilize and/or that large numbers of hospitals will go under, I still think that Intuitive will outperform the market going forward.

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