Well, last week wasn’t so great for the market. It couldn’t decide whether to panic over the coronavirus or not, but by Friday, it was in full selling mode. The S&P 500 dropped over 2%, or 70 points, down to 3,225.52.
This week has been shaping up to be a lot better. Let’s hope it continues. But until the coronavirus outbreak is contained, volatility will still be high.
Let’s go over the picks:
Previous Pick: [quote symbol=”LM” attribute=”companyName”/] (NYSE:LM)
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LM actually did pretty well last week considering the market’s performance as a whole. While the S&P 500 fell over 2%, LM rose 0.75%.
However it didn’t escape entirely unscathed. In fact it saw a high of $40.61 last Thursday, only to fall to $39.15 by market close on Friday.
That certainly hurt a bit, but it picked up momentum again today, reaching a high of $40.01 before closing at $39.52.
in my opinion the trend is still strong. In full disclosure, I have a $37 call for 3/20. So I believe it’ll just keep going up from here.
LM also had their Q3 2020 earnings report last week, reporting $1.03 EPS, beating the analyst consensus of $0.95 by 8¢. This bodes well for the upcoming quarter, so I’m excited to see where it goes from here.
New Pick: [quote symbol=”ISRG” attribute=”companyName”/] (NASDAQ:ISRG)
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Data as of January 31, 2020
- Company name: Intuitive Surgical, Inc.
- Exchange: NASDAQ
- Last close: $559.78
- 52 week low: $455.15 (2019-06-03)
- 52 week high: $616.56 (2020-01-10)
- sector: Health Technology
- Industry: Medical Specialties
- CEO: Gary S. Guthart
- website: http://www.intuitivesurgical.com
- Peers: HOLX, SNN, BSX, VAR, BDX, MDT, BAX, SYK, TFX, FMS
- Ticker: ISRG
- Market cap: 64.7B
- Avg. volume: 733,655
- Zacks Rank: 3 (Hold)
- YTD change: -6.03%
- Beta: 1.34
- Forward P/E ratio: N/A
- P/S ratio: 14.45
- PEG ratio: 2.67
- Div. yield: 0.00%
- Next earnings date: 2020-04-21
Intuitive Surgical, Inc. engages in the development, manufacture, and marketing of da Vinci Surgical Systems, and related instruments and accessories for invasive surgery. Its products include Da Vinci and Ion. The company was founded by Frederic H. Moll, John Gordon Freund, and Robert G. Younge in November 1995 and is headquartered in Sunnyvale, CA.
About the Company
Intuitive Surgical (NASDAQ:ISRG) is a leader in robotic-assisted surgery devices, and with an incredible track record spanning decades, the company continues to bring in record earnings. Intuitive Surgical is the company behind the da Vinci surgical system, one of the most significant robotic-assisted surgery devices on the market.
Intuitive develops, manufactures, and markets robotic-assisted devices for surgical procedures. The da Vinci system was first approved by the U.S. Food and Drug Administration (FDA) back in 2000, and for the past 20 years, the company has brought in revenue from their single-use devices and signature surgical systems.
Intuitive Surgical has a number of developments that hold promise for the company’s future. Just last year in November 2019, Intuitive Surgical gained clearance from the U.S. Food and Drug Administration (FDA) for its E-100 generator, a robotic generator used to power two instruments on the pair of da Vinci systems, which was a major upgrade.
The FDA also approved a new instrument called SynchroSeal to improve how fast surgeons can cut and seal tissue. Early last year in February 2019, the FDA cleared the flexible catheter for lung biopsies, and approved the company’s single-port da Vinci system for radical tonsillectomy in March 2019 as well. Intuitive Surgical made even bigger strides last summer when they acquired Scholly Fiberoptic’s robotic endoscope business.
Intuitive Surgical’s growth stems from the recurring revenue of several sources including the increase in the sale of instruments and accessories for the da Vinci system, and the increasing number of procedures performed with the company’s signature robotic-surgery device. And as the number of procedures performed with the da Vinci system continues to rise, so will the recurring revenue.
Intuitive’s positive sales and earnings have consistently grown for the past 20 years. Intuitive Surgical has the edge to compete with rivals including top competitor Medtronic, Medrobotics, and Robodoc in robotic surgery, and it’ll be interesting to watch how they measure up in the future.
Intuitive’s CEO, Gary S. Guthart has an approval rating of 92% and has been successfully running the company for 10 years. Before filling the role, he served as Chief Operating Officer, and held multiple engineering roles within the company.
With nearly 4.2 billion in annual revenue, Intuitive’s reputable placement in the market is largely due to their sophisticated surgery products and the increasing number of medical facilities using their systems. As their competitors trail behind, Q1 results will reveal how well the company turned out for 2020.
Why I Like Them
So if you look at the chart above, they might seem to be suffering a bit, and that’s true. Two weeks ago they received an analyst downgrade, and then the coronavirus has also hit their stock pretty hard. I watched the stock plunge from $590 all the way down to $560.
I’ve shown three moving averages above: the 20-day, 50-day, and 100-day. You can see that the price is currently far under both the 20-day and 50-day averages.
I’ll get to why I’m still choosing them in a moment. First let me cover the fundamentals.
Granted Intuitive Surgical could not be called a value stock. Their P/S is through the roof at 14.45, and it’s PEG ratio is pretty high at 2.67.
However it has a history of strong growth. It’s historical growth rate over the past 3-5 years is 21.15%, compared to its industry’s 13.63%. Looking to the future, it’s expected to have a long-term EPS growth of 11.55%.
Most analysts are very bullish on Intuitive Surgical. Out of 18 analysts, 10 rate it as a buy, 2 as outperform, 5 as hold, and 1 as a sell.
Even the most bearish analysts have a price target of $595. The average price target is $657.16, and the highest price target is $729.40.
Zacks holds it as a rank 3 (Hold). I’d prefer it to be higher, and indeed last week when I was planning this pick, it was a rank 2 (Buy). But Zacks Rank #3 can still be very profitable.
Now back to the chart above. You can see that it blew right through the 20-day and 50-day moving averages. However I believe that it’ll find support at the 100-day moving average. You can see that it dipped just below the 100-day SMA last Friday. However today (February 3rd), the price closed at $565.62, seemingly bouncing off that trend line. Let’s hope it holds.
This is a new type of chart, called the Relative Strength Index (RSI).
The RSI shows how overbought/oversold a stock is. If a stock is overbought, that means that buyers will become exhausted and sellers will come in to start pushing the price lower. If the stock is oversold, that means that sellers may become exhausted, and buyers will come in to bring the price higher.
In general, 70 and above signifies overbought conditions, and 30 and below signifies oversold conditions.
As you can see, last week the RSI quickly dipped down to levels nearing 30. I show this because it supports my theory that the stock is oversold and due for a rebound.
Again, this is certainly no value stock. And I don’t like that it’s only a Zacks Rank #3 (Hold), and many of its valuations are high.
Yet it has a history of strong growth behind it, and its surgical robotic instruments have been experiencing greater adoption.
I’d certainly keep an eye on it, but I believe that it’ll start going up soon. Once it recovers, I’d want to see my favorite indicators supporting a positive trend, like the 20-day SMA, and the Average Directional Index (ADX). Right now it’s not there, but I think it will be soon.
Legg Mason (NYSE:LM) went up last week despite panic in the market due to the coronavirus. However I think it has even more upside, thanks to its strengthening trend and positive earnings.
Intuitive Surgical (NASDAQ:ISRG) has gotten a bit beat up lately with an analyst downgrade, plus getting caught up in the coronavirus sell-off. However it is a good company experiencing strong growth and is expected to continue growing in the future. I believe it’s oversold and will start to recover, but once it does I’d want to see other indicators supporting a positive trend.