Player Avatar TSIF (99.96) Submitted: 9/15/2011 8:13:59 PM : Underperform Start Price: $37.27 MAKO.DL Score: +6.57

I've played down Mako Surgical successfully in the past. While overall I think they have a bright future and some nice products, in my opinion, shoot at me if you want for thinking so, Mako Surgical is overvalued above $30 per share in the current climate at it's current stage. While it bounced back impressively from the July/August market selloff (from $31 to $21 or a heart pounding 33%) back up to $37 the selloff shows the predicament of equities that have had strong stock appreciations in the last year. From $10 to $35 made those who "got in" earlier this year a 3x+ return the loyalty in this volitile market doesn't usually generate in many risking losing such nice gains on a selloff.

Some of the rise is the comparision to Intuitive Surgical which is up 32X since 2003. I'm not sure if the comparision is close and I do understand the value of finding an entry position in a promising equity, but I expect a correction to occur soon. I fully understand that a company with new products, similar to a biopham cannot be accurately "forward valued" with the finanical metrics, but in the short run, in a volitile market, they are useful to how far ahead the pricing has gotton.

Mako Surgical continues to lose money and while I agree that when Mako Surgical does book a profit that it will be a nice catalyst for the stock, at this point however the P/B of 14, P/S of 26 and the negative cash flow do not support the 3X rise. In addition we have an outgoing negative cash flow of $30 Million and while there is no debt, less than $56 Million is left to bring products to market. A 26% short position could cause another spike upward should Mako Surgical issue any "surprises", but overall I believe this run is done. It's hard to argue at times with momentum stocks as the top is very difficult to call, but I think the risk/reward is back down on this one.

In May I estimated a drop to $22 and Mako bottomed at $21. It certainly had an accelerated bottoming from the scared investors in a depressed market and bottoming at $21, based on it's rapid snap back was clearly very low by any standards and hopefully presented a buying opportunity for "loyal longs".

I will probably get criticized (again) for a negative outlook in valuing an early innovator, but my goal here on CAPS is to learn and see how the market reacts under a variety of conditions. My theory is simply that the market is struggling with too many negative inputs and Mako's run is fragile and likely to retrace. Those loyal can ride the see-saw, but I'm putting a stake down to learn so I can have the best possible entry points in company's in this position.

If you're a loyal long with a strong belief who has DD'd this one, then by all means, buy it up and Good luck!

Report this Post 3 Replies
Member Avatar DirkHolthusen (< 20) Submitted: 11/16/2011 12:57:10 PM
Recs: 0

I got killed the first time I bought this, and the re-recommendation by Motley "talked me" into buying again. I wish I had read you analysis before jumping in again! It's down over $2 and I'm now allowing the same lousy stock slap me AGAIN!

Member Avatar TSIF (99.96) Submitted: 11/16/2011 5:10:02 PM
Recs: 0

I closed this call and put a new one in near the earnings report.
I didn't realize this was a MF darling, although I'm pretty tuned into their recs.
It's no wonder I got hammered and ganged up on when this pitch was published in one of the copious "plunge" articles!
This one may do well long term.
MF does look long term, but it's hard to be long term in this market. I've cut down on my own long term calls and either swing trade or set trailing limits on my calls, walking them up and getting stopped out on a big swing. A bit dangerous near an earnings report, but otherwise it works better for me. Long term Mako has some possibility, but FDA overhang worries me on any medical stock for the next few quarters. Good luck!

Member Avatar taiwanted (< 20) Submitted: 12/9/2011 11:37:16 AM
Recs: 0

Just because Motley Fool makes a recommendation does't alway mean the bottom has been reached in a stock. Checking the daily and weekly charts before buying is very helpful in deciding if an immediate buy situation is now. After all, it is all about buying low and selling high, not about buying what reporter along tell you.

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