Stryker Needs A Growth Resurfacing

Stryker (NYSE:SYK) used to be on the glory stocks of the medical technology sector. Every year, they churned out 20% earnings growth no matter what, and a lot of money was lost betting that the trend would end. Nowadays, though, that seems like a distant memory and the prime question about Stryker is whether they can recapture growth and leadership in their markets. 

The Quarter that Was
June was not a very encouraging quarter for Stryker fans. Revenue was up 7% overall and that was just shy of analysts' average guess. The trouble, though, was in the details. The MedSurg business showed 15.9% increase in sales as hospitals played catch up on the purchase of equipment like hospital beds; purchases that were postponed during the 2008-2009 troubles. The company's core orthopedics business, though, was only up a bit more than 1%, and hips, knees, and spinal care were all very weak. In fact, I believe this is the weakest result Stryker has produced here since they bought Howemedica from Pfizer (NYSE:PFE) in 1998.  

For the full column, please go to:
http://stocks.investopedia.com/stock-analysis/2010/Stryker-Needs-A-Growth-Resurfacing-SYK-PFE-ZMH-SNN-WMGI0722.aspx

Full disclosure - Johnson & Johnson (NYSE: JNJ) is also a major orthopedics competitor. Per Investopedia policy, I am not allowed to mention any names I own in my own accounts. 
Full disclosure (pt 2) - I own shares of Johnson & Johnson.  

Seven Hot Medical Device Ideas

I have made the case before that medical technology has something to appeal to any type of investor. If you want value, you will find it. If you want income, you will find it. Today, we talk about some of the most highly-valued "hot" stocks in the space. 

Edwards Lifesciences - Not Boring Anymore 
For quite a while, Edwards Lifesciences (NYSE:EW) was a sleepy company. A leader in tissue heart valves and critical care monitoring products, there was a time when it was difficult to get anybody interested in this idea.

Not anymore.

Edwards is making a concerted effort to move into higher-growth, higher-margin products. With a very interesting new approach to heart valve replacement, the minimally-invasive trans-catheter Sapien valve, the company is well on its way and could become a consistent double-digit grower. (For more, see A Checklist To Successful Medical Technology Investment.)


For the complete article, please go to:
http://stocks.investopedia.com/stock-analysis/2010/7-Hot-Medical-Device-Ideas-EW-ISRG-THOR-DXCM-PODD-NUVA-MEND0707.aspx

Covidien's Still Hungry

Nobody is going to accuse the management at Covidien (NYSE:COV), a diversified medical technology company, of being slow to make any changes. It was only two weeks ago that the company announced that it was entering the peripheral and neurovascular intervention markets by buying ev3 and largely exiting parts of the respiratory care market with a divestiture. 

Now the company is at it again, announcing Wednesday morning that it was acquiring small medical device maker Somanetics (Nasdaq:SMTS) for almost $300 million in cash. That deal represents a 32% premium to the closing price prior to the deal, and a valuation of nearly six times on a trailing price-to-sales basis. Given that growing small-cap medical technology companies generally trade for between four and six times trailing sales and get bought out at between five and eight times, this seems to be a fair deal for both parties. (For more on this topic, check out The Wacky World Of Mergers And Acquisitions.)


You can read the full piece here: 
http://stocks.investopedia.com/stock-analysis/2010/Covidiens-Still-Hungry-COV-SMTS-EW-MASI-BLUD-VOLC-ZOLL0617.aspx

Covidien Shuffles The Deck

One of the least-surprising take-outs I've seen was today's announcement that ev3 is getting bought out. That said, I'm not sure you could have found 10 people who would have put Covidien in the top three most likely buyers. Bard would have made sense to me, as well as Cook or even Boston Scientific or JNJ. But Covidien? 

Strange times... 

By the way, I do own shares of JNJ.

Medical technology companies, particularly the larger ones, tend to be quite acquisitive. So, another sign that normalcy may be returning to the economy and the market is when acquisitions start to tick up again. The good news is, this appears to be happening now. In the wake of the Medtronic (NYSE:MDT) and ATS Medical deal a little while ago, Tuesday saw the announcement of a larger deal between Covidien (NYSE:COV) and ev3 (Nasdaq:EVVV). 

For the full article, please continue on to:
http://stocks.investopedia.com/stock-analysis/2010/Covidien-Shuffles-The-Deck-COV-EVVV-MDT-CSII-SPNC-BSX-MEND0601.aspx 

Intuitive Surgical - Are Robots To Be Trusted?

It is a given that if you invest in stocks long enough, you will have a thick mental file labeled "Should'a, Could'a, Would'a." I typically do not give much mental time share to ruminating over what could have been bought, but one stock that does get my teeth grinding is Intuitive Surgical (Nasdaq:ISRG).  


Regardless of why I did not pull the trigger and buy the stock, it's worth investigating whether or not Intuitive Surgical has the right stuff to endure. Will it be a flash in the pan, or will it stay independent and become a future med-tech titan? 

The full article can be read at: 
http://stocks.investopedia.com/stock-analysis/2010/Intuitive-Surgical---Are-Robots-To-Be-Trusted-ISRG-HIT-SI-MDT-BSX0601.aspx 

Medtronic - Life In The Crosshairs

When you execute as well as Medtronic (NYSE: MDT) has over the years, when you become a leading company in virtually every market in which you compete, you get the dubious reward of being the company everyone else wants to knock off the mountain. So far, though, Medtronic management continues to demonstrate that it is capable of taking a huge business and making it even bigger. 

The Quarter That Was 
Medtronic reported its fiscal fourth quarter results May 25. As has been the case of late, the results were "good ... but not great". Revenue was up about 6% in constant currency terms, and that was more or less in line with expectation. Likewise, bottom-line earnings per share were up 9% and two pennies higher than the average analyst estimate.  

For the full article:
http://stocks.investopedia.com/stock-analysis/2010/Medtronic---Life-In-The-Crosshairs-MDT-BSX-STJ-ZOLL-NUVA-CFN-EW0528.aspx

Please note, the editor of the piece made a small error in spelling out St. Jude as "Saint Jude".

Reposting - Great Dividend Payers In Medical Technology

I just found out that the original link for this article wasn't working. 
Here's is a reposting. Apologies for the inconvenience!

There are a lot of solid reasons for investors to include medical technology stocks in their portfolios. The healthcare sector has grown faster than the economy and seems poised to continue to do so, and the more established names in this field routinely post excellent returns on capital. Better still, medical technology is generally spared the feast-famine cycle of patent expirations that bedevil the pharmaceutical sector. 

Now we can add another reason to like medical device stocks - dividends. As many investors already know, the stocks of companies that pay dividends tend to outperform those that do not. When you combine the advantages of dividend-paying stocks with the advantages of medical technology stocks, you have a powerful mix.

Full text at:
http://stocks.investopedia.com/stock-analysis/2010/Great-Dividend-Payers-In-Medical-Technology-ABT-BAX-MDT-BDX-BSX0521.aspx  

Good Luck, Peter

Saw an announcement after today's close that Peter Donato has resigned from his position as CFO at IRIS International. I had the pleasure of interacting with him a number of times while I covered his company as a sell-side analyst. Much as it pains me to praise any fan of Ohio State and the Detroit Redwings, I always enjoyed interacting with Peter, and IRIS is poorer for his departure.

I won't even begin to speculate as to why he is leaving the company and what it may, or may not, mean. People move on in business and it's just a fact of life. Still, it's another ripple through a company that seems to be pretty much cursed with them. Given what the company hopes to accomplish in the near term - filing for VELOCITY, securing FDA approval for ProsVue, launching those two products in the US, and rebuilding the company's reputation with the Street -- that is a pretty significant shake-up for the company.

I guess the "good news" here for an IRIS shareholder is that the value of the stock is pretty much based upon what the company *should* be able to do and not what it has been doing recently. Accordingly, assuming that the company recruits a qualified candidate, it shouldn't really impact the story over the long-term. Still, I would be nervous about what this management shake-up is going to do to the company's launch plans.

Again, best of luck Peter!

Three Growth Med-Techs Show Their Cards

The following went up this morning on Investopedia:
http://stocks.investopedia.com/stock-analysis/2010/Three-Growth-Med-Techs-Show-Their-Cards-HOLX-IRIS-VOLC-GE-CPTS-GPRO-BSX-IHI0506.aspx.

As earnings season winds down, a relatively rare trifecta occurred May 3 as three quality growth med-tech stocks reported their earnings. Hologic (Nasdaq: HOLX), IRIS International (Nasdaq: IRIS) and Volcano (Nasdaq: VOLC) all reported earnings with varying degrees of performance. 

For the full article:   http://stocks.investopedia.com/stock-analysis/2010/Three-Growth-Med-Techs-Show-Their-Cards-HOLX-IRIS-VOLC-GE-CPTS-GPRO-BSX-IHI0506.aspx.

Small Med-Tech Names You Should Know

A quirk of timing led to me having two articles posted today on Investopedia.

Here is the second one.


http://stocks.investopedia.com/stock-analysis/2010/Small-Med-Tech-Names-You-Should-Know-ICUI-IRIS-LMNX-HSP-ILMN0415.aspx


Small Med-Tech Names You Should Know

Healthcare is a huge space, and for every Medtronic (NYSE:MDT) or Pfizer (NYSE:PFE), there are dozens of quality names that go unnoticed by the investing public. A little time and effort, though, can uncover some intriguing names that may deserve a place in investors' portfolios. Today we highlight three ideas.

http://stocks.investopedia.com/stock-analysis/2010/Small-Med-Tech-Names-You-Should-Know-ICUI-IRIS-LMNX-HSP-ILMN0415.aspx

Medtronic Sneezes, Investors Feel Sick (MDT, BSX, STJ)

This one is a little old/late (it was published before Thanksgiving), but I forgot to post it up here.

Better late than never!

http://community.investopedia.com/news/IA/2008/Medtronic-Sneezes-Investors-Feel-Sick-MDT-BSX-STJ1124.aspx

Memo to JNJ -- WTF?

I've been a Johnson & Johnson shareholder for some time ... but more and more I'm wondering why.

Today JNJ announced that it's paying a little more than $1B for Mentor -- a company known mostly for breast implants and wrinkle treatments. This follows other phenomenally successful JNJ buys like Conor in recent years (tongue firmly in cheek for those who don't know my sarcasm).

Now, is there real growth potential in the aesthetic and reconstructive segments of health care? Sure. Elective cosmetic procedures are going to slow to a trickle during this recession, but I don't care so much about that ... they'll be back eventually and whether that's 2010, 2011, or 2012 isn't all that important to me. What's more, JNJ does have some exposure to that market already and could (arguably) use more products to leverage it existing salesforce there.

But more and more I wonder if JNJ management really has a plan and, if so, whether that plan is worth hanging around for as a shareholder. I'm not universally opposed to growth-by-acquistion in the med-tech space, and companies like Medtronic have shown that it can be a successful strategy. But I am opposed to serial acquirers who add little to the businesses they buy.

There's plenty of interesting cardiology, neurology, and radiology technologies out there, to say nothing of life sciences and diagnostics. These are technologies that serve real diseases, have solid reimbursement, and can be cornerstone growth platforms for a health care company. Instead, JNJ goes the way of fake ta-ta's.

I hope I'm wrong about this and it turns out that JNJ isn't overpaying for a non-strategic asset, but I'm increasingly feeling that it may be time to sell my JNJ shares and move on to the next big idea.