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Chasing Value: Intuitive Surgical Earnings -- what now?

 Oct 17, 2008 06:52 PM UTC
Picture_29
Return Risk
+2.76% MID
Tracked Blogger
Symbol Sentiment Start Return Closed
BRK.A Positive 10/17/08 -19.03% 12/19/08
ISRG Positive 10/17/08 -36.26% 11/17/08

Graphic_arrow1 Via BloggingStocks:  

Filed under: Earnings reports, Berkshire Hathaway (BRK.A), Chasing Value, Stocks to Buy, Intuitive Surgical Inc (ISRG), Best Stocks for 2008

The first time I bought Intuitive Surgical Inc (NASDAQ: ISRG) I paid around $7 per share and that is about the lowest point since it went public. Those shares have been sitting in our portfolio as our largest position and our best investment for quite some time.

ISRG makes computer assisted robotic surgical equipment to assist doctors in a growing range of less invasive procedures.

The stock closed yesterday at $214.80. I have been tempted to buy more shares many times over the last few years and regular readers know how much I like this stock: Intuitive Surgical jumps over 32% - where's the ceiling?

Until today I hesitated to buy more because the stock was jumping so fast that I always thought it was slightly ahead of the value. Each time it just went up more.

After the market closed yesterday ISRG reported an increase in revenue and earnings.


  • Revenues for the quarter grew 50% over the same period last year. The company's third quarter 2008 net income was $57.6 million, up 41% from $40.9 million reported for the third quarter of 2007. Earnings per share increased to $1.44 from $1.04 in the prior-year comparable quarter. Eleven analysts polled by First Call/Thomson Financial expected the company to earn $1.27 per share for the quarter.


Even though the company beat earnings expectations by $0.17 (13.38%) a share the stock dropped almost 16% a share, since yesterday. Until today I watched the stock go from $7.00, to as high as $359.59, its all-time high and stayed on the sidelines except to buy a little for my kids shortly after our company got in.

Today, with the share price 50% off its high; with investors afraid of their own shadows; with world financial markets in turmoil; I bought more at $180 per share. That is 10 times what my kids shares cost and almost 26 times what I first paid.

This one is a keeper and one of the few stocks besides Berkshire Hathaway (NYSE: BRK.A) that I have ever recommended that does not pay a dividend. Even Warren Buffett has been buying and recently posted a bullish story in the NY Times. The following is the five-year chart for ISRG.


Chart


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