More Nibbling on the way down — Intuitive Surgical

By Travis Johnson, Stock Gumshoe, November 17, 2008

I continue to have some orders in place for stocks which are falling fast, but which have strong tailwinds for future growth even in a poor economy.  There’s no doubt that some of these stocks will continue falling after I buy them, if I buy them (I certainly can’t pick the bottom for you), but many of them are companies that I’d like to own at lower prices for the long term.

I think one such opportunity is Intuitive Surgical (ISRG), which is a broken growth stock but still a very successful growth company, and my order to buy some shares in the $130s was triggered today — in part because the market is falling further, and in part because the stock got one downgrade today and was snubbed by Investors Business Daily on Friday.

When I place lowball orders like this they are generally for small amounts of stock, and (with some exceptions) they’re companies that I’m very comfortable with in terms of management, market, and business prospects.  I owned Intuitive Surgical previously for a couple years and sold my shares around $300 because the price was getting way ahead of the story.

Now, the story has continued to advance, but the price has declined — prostate surgeries and other procedures show no signs of slacking off, Intuitive Surgical has a dominant position as the only provider of a general surgery robot that no competitor will likely pierce anytime soon, they have excellent growth and a growing base of stable ongoing revenue, and no debt … that adds up to being a company I want to own, and since I think today’s price is a very fair one I’ve now bought in with a small position.

There is a downside, of course — if there weren’t, the stock wouldn’t have fallen this far (the high was over $350), even in a bad market.  I expect that the two primary fears are that growth in procedures performed will plateau, which is possible, but which I believe is easily built into the stock’s current valuation; and that the current credit crisis is going to be a huge problem for hospitals, and will hurt their ability to buy da Vinci robots at $1.5 million a pop.  Both fears have some merit, though I discount them more than the general market seems to — I could, of course, be wrong.

The bigger ...

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