3 Long Plays for Now: MasterCard, Priceline, Intuitive Surgical

The NASDAQ, S&P 500 and Dow Jones Industrial Average appear to have turned a corner. After groping at bottoms for the past several months, the major averages appear poised to move higher.

Previous rally attempts in 2008 have been characterized by lackluster leadership. This rally appears to be different. Shares of several growth companies are trading at or near all-time price highs and emerging from constructive areas of price consolidation. This speculative growth leadership includes Intuitive Surgical (ISRG), Priceline.com (PCLN) and MasterCard (MA).

Intuitive Surgical is one of the market's strongest performers. EPS growth estimates for the coming two quarters are 60% and 52%. The company has no debt and a return on equity of 19.55%. It also sits on nearly $500 million in cash and boasts a profit margin of 24%. The share's price is moving out of a multi-month area of consolidation on strong volume. This is the most bullish thing a stock like ISRG can do.

Pricline.com is another stalwart. PCLN's fundamentals are excellent, if not off the charts like ISRG's. EPS growth estimates for the coming two quarters are for 37% and 15%. The company has a debt to equity ratio of 0.984 and a return on equity of 33.38%. Priceline.com sits on about $500 million in cash and has a profit margin of 11%. PCLN shares have traded in a tight price consolidation since early February, appearing poised to break through to new highs.

Market darling MasterCard is another heavy hitter trading near price highs. EPS growth estimates for coming quarters are 26% and 34% respectively. Wall St. consensus estimates have been raised over the past months. The company has a debt to equity ratio of 0.076 and return on equity of 40.28%. MA shows $22.64 per share in cash and a profit margin of 26.70%.

Disclosure: None

Comments

[bafnotrad:]

Sinclair do a little homework on Priceline before you write your garbage. How much of their cash will disappear once their 570 million convertible comes due and they have to pay the exercise in cash. Look at their conversion hedges that will unwind and look at the true dilution of the stock.

2008 Apr 02 01:13 PM

[User 171933:]

Gee...it's really too bad that this article wasn't dated April 02, 2007 instead.

Unless I'm sadly mistaken, my guess is that the smarter money will be selling to the unfortunates who happen to take your advice.

2008 Apr 02 04:50 PM

[jrss:]

Why do people like you will not say anything when ISRG was 250 and MA was 180. Wall street guys pump when it is peak and sell their stock and then drop the ball...

2008 Apr 03 03:24 PM

[Proud Canadian:]

Just give me one raison to buy ISRG ?

2008 Apr 03 09:55 PM

[Dr. Frank P:]

ISRG - revolutionizing standard surgical approaches to common problems with minmally invasive, surgically precise approach. Open prostate surgery with risks of post operative impotence and incontinence becomes a dinosaur.

2008 Apr 04 10:57 AM

[Proud Canadian:]

The numbers please !
Profit, valuation, "P/E" show me the money

2008 Apr 05 03:00 PM

[Stephen Sin...:]

Hi All,

Thank-you to everyone for taking the time to read and comment on my writing. I am humbled to be part of Seeking Alpha.

Proud Canadian, I have added Intuitive Surgical to my Glam 5 Index because it matches data points of successful stocks of the past. These include 25% plus EPS growth, 25% plus sales growth, low debt, strong return on equity, and shares trading near historical highs on strong volume. Price earnings ratios are a popular measure of equities value, which I feel hold little predictive value. In fact, I prefer high price multiples.

Bafnotrad is correct in his analysis of Priceline.com. We obviously disagree on whether or not the market has already priced this conversion into the stock.

As for being a Wall Street guy. Folks, I trade a very small account with my own hard earned money. I live off of a successful, micro business. I do not earn a penny from my writing or my blog. This doesn't mean I don't hope to some day. I always make changes to my index publicly before I make the same move with my own money. I would never attempt to front-run or manipulate any stock. I write about the stock market because I think I have something to share with people. There are many things in life much more important than money. While I am an excellent stock trader, I could care less about the market. I am much more interested in my son and catching rainbow trout.

I walked away from Bay Street precisely because of type of behavior jrss describes. The stock market is a tough business. I welcome all criticism.

I cannot predict the future. I make mistakes all the time. If any of my positions fall 5-8% below my purchase price I will sell them. I advocate stop losses on all stock positions.

All the best,
Steve Sinclair

2008 Apr 06 11:14 PM

[Jovian:]

Well said Steve. Thanks for your insights and your civility. I always take everybodys opinion with a grain of salt, but if it weren't for folks like you I'd wouldn't have the opportunity to weigh the possibilities.

2008 Apr 08 11:37 AM

[Stephen Sin...:]

Just to keep everyone up to date. I have removed PCLN from my Glam 5 Index with a 5.5% loss causing a 0.55% loss in the index.

2008 Apr 11 02:21 PM

[Stephen Sin...:]

ISRG has been removed as well. Stopped out with ~6% loss.

2008 Apr 14 12:13 PM

[Stephen Sin...:]

MA has been removed from the index with a ~23% gain.

2008 May 21 03:50 PM