As we are again near the top of a trading range that has been in place for a few months, I am actively looking for high priced stocks to short to offset my long positions. One stock that I believe has run up too high and I shorted through a bear market call spread at the close Friday is Intuitive Surgical (ISRG)
Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Its da Vinci surgical system consists of a surgeon's console or consoles, a patient-side cart, a 3-D vision system, and proprietary wristed instruments. The company's da Vinci surgical system translates the surgeon's natural hand movements on instrument controls at the console into corresponding micro-movements of instruments positioned inside the patient through small puncture incisions, or ports. (Business description from Yahoo Finance)
- Near a 52 week high, it appears to be forming a short term topping pattern (See Chart).
- ISRG has run up 80% in 2011 and the tailwinds generated by year end window dressing should end shortly.
- Revenue growth is slowing. Intuitive Surgical has grown at an average clip of 31% annually over the past five years, but is only expected to grow sales at 23% and is projected to have revenue growth of 18% in FY2012.
- The stock is selling above analysts’ price targets. The median analysts’ price target on ISRG is $416.
- Insiders have sold over $20mm in shares over the last two months.
- ISRG sells at over 10 times trailing revenues, over 25 times operating cash flow and has a five year projected PEG of almost 2.
Disclosure: I am short ISRG.
