Intuitive Surgical: Medical Device Stocks Look Oversold - But Not Recession Proof

Intuitive Surgical (ISRG) is trading at $163, far below its Morningstar.com's revised estimate of its fair value and its July 26 estimate of $175, which was made when the stock was at a lofty $322.07. Morningstar's current fair value estimate is $223, but given current economic conditions, that could be revised downward at any time.

I have blogged on ISRG 14 times, and profiled it in depth last April here. This is a case where Barron's correctly called the stock overpriced in its July 28 edition, as I reported here. Indeed, a few days later, ISRG's insiders reacted to the Barron's piece by selling $6 million worth of their holdings in the stock. But ISRG isn't the only medical device company on the ropes.

As these charts show, they're down sharply from last summer's prices along with the overall market. Indeed, medical device stocks are oversold and may be for quite a while. This is just more evidence that health care stocks and medical stocks are not good places to hide when markets crash and the economy is facing a recession.

ISRG has been what I call a "groupie stock." It's fans flame anyone who suggests it may go down. They fall in love with their stock, which always is a mistake. Wonder who they're flaming now?

Disclosure: I don't own these stocks.

 

Comments

[User 278265:]

What a piece of garbage article from a piece of garbage author. I've never seen a "real" commentator say something like, "ISRG has been what I call a "groupie stock." It's fans flame anyone who suggests it may go down. They fall in love with their stock, which always is a mistake. Wonder who they're flaming now?"

This idiot "Donald Johnson" is proud that ISRG dropped recently like he predicted. Woopeee. 99% of all stocks dropped recently. What a genius. Guess what? I predicted that the sun would rise this morning. Maybe I should publish an article on Seeking Alpha bragging about what a genius I am because the sun rose this morning.

2008 Oct 13 12:01 PM

[User 278265:]

What a piece of garbage article from a piece of garbage author. I've never seen a "real" commentator say something like, "ISRG has been what I call a "groupie stock." It's fans flame anyone who suggests it may go down. They fall in love with their stock, which always is a mistake. Wonder who they're flaming now?"

This idiot "Donald Johnson" is proud that ISRG dropped recently like he predicted. Woopeee. 99% of all stocks dropped recently. What a genius. Guess what? I predicted that the sun would rise this morning. Maybe I should publish an article on Seeking Alpha bragging about what a genius I am because the sun rose this morning.

2008 Oct 13 12:02 PM

[speculari:]

to user 278265 - AMEN! I concur, Mr. Johnson is typically way off in his prognostications, and he could not wait to launch this little diatribe. Let's see what the next day or two brings, especially after ISRG reports earnings on the 16th.

2008 Oct 13 12:48 PM

[borisb:]

the issue is wiether or not iSRG is a niche product for a few select surgical procedures or something more broad covering dozens of procedures. At this time it is more of a niche so why pay some outragous premium for some growth pattern that doesnt actually exist?

2008 Oct 16 08:41 PM

[speculari:]

To borisB & Mr. Johnson: Suggest you two climb into the same lifeboat & set sail for a trifle more education! A suggested itinerary might be; up the alimentary canal of the tidy pachyderm (careful - do not make the oft committed mistake of judging the size of the creature by the size of it's tail!).
Then let us know when you have completed this stage of your journey (please keep a count on the number of times you jibe, get knocked down and, be-calmed) and we'll have some additional suggestions as to where you might go next. Be civil at all times!

2008 Oct 20 10:29 AM

[davemcc3300:]

Johnson has a valid point about "groupie" stocks. Another name for this is "story" stock. I've owned two of these and ended up getting my hat handed to me with my head in it: NutraCea (NTRZ) and Headwaters (HW). Like ISRG, both are fine companies with great "stories" that I fell in love with, and got into so "early" that the smart investors in the stocks turned out to be the ones who sold when the price was high.

I think ISRG is worth buying, but I put it in the "story" -- or "groupie" or "gotta love" -- stocks that just aren't good enough at the fundamentals yet ... or maybe just haven't been discovered by level-headed investors yet.

ISRG buyers beware.

Dave

2008 Oct 26 03:48 PM

[speculari:]

To Dave: Your analysis seems flawed:
NTRZ is a "penny" stock trading around .37 cents. Dismal stats!
HW is trading around $9.00 , has debt of 65%, declining sales, eps is minus 73% for 2008.
Where are the fabled stories on these two stocks? Neither one can distinguish itself because of a patent, a product, or any competiive edge.
Nor is there any consistent pattern of earnings & sales growth. If there is a moral imperative here, it would seem to be - do not buy cheap stocks.
Mr. Johnson is correct on one point, one should never fall in love with any stock! However, his "groupie" analogy is simply a "cheap" shot at those who do not agree with him.

2008 Oct 28 11:02 AM