Thursday, July 10, 2008

Bookkeeping: Closing Intuitive Surgical (ISRG)

Intuitive Surgical (ISRG) is sort of in no man's land right now. It is below all key moving averages, but not too far away... and it has not really "broken down" - it's sort of in the middle of both scenarios. Neither strong not super weak. At this valuation, and technical level I don't have any major conviction in adding to it so I am going to close the position to raise a bit of cash - it is only a 0.3% stake so it did not raise too much for us.

We started this position in mid April, after it sold off from the mid $300s on disappointing guidance but it has done nothing since - losing a cool $3300 for the fund. It has simply drifted sideways or downward. The valuation is still rich and even with this pullback this is the type of valuation that requires the company to hit on all cylinders and even one wrong phrase in a conference call or earnings report sends the lemmings in a tizzy. While I like the diversification it gives us in terms of sectors - it is not performing at this time and just eating up space and money. I'd be more interested on either a pullback to 2008 lows in the $230 area or on a breakout over $285. Unfortunately it is now receiving the dreaded "death cross" where the 50 day moving average crosses below the 200 day moving average - we never like that. (the chart below does not show it accurately) But all it takes with a stock like this is a "happy" earnings report and technical analysis will mean nothing (i.e. the stock could skyrocket). Not worth the chance with the chart breaking down like this. With the stock up a bit from recent lows of $250, we're selling it in the mid $260s.

Analysts were out defending Intuitive Surgical (ISRG) recently but it has done nothing even with that support. (granted the market is killing everything)
  • Shares of robotic surgery systems maker Intuitive Surgical Inc. rose more than 1 percent Monday, as a ThinkPanmure analyst said market fears about hospitals' access to credit to buy equipment have been overblown.
  • Sunnyvale, Calif.-based Intuitive Surgical makes da Vinci systems which allow surgeons to perform highly intricate procedures through small ports or incisions, using robot technology. This makes the surgery less invasive for patients, who experience less pain and quicker recovery.
  • Analyst Stephan Ogilvie upgraded shares of Intuitive Surgical to "Buy," and backed his $360 price target, saying a recent sell-off has created a buying opportunity for investors at historically cheap levels.
  • Over the last 12 months the stock has almost doubled, but since mid-April shares have lost about a quarter of their value due to a disappointing 2008 outlook.
  • He also said that checks with a number of third-party hospital finance specialists lead him to believe there hasn't been a slowdown in access to credit to buy hospital equipment, despite weak financial markets. And although General Electric Co.'s earnings miss last quarter on disappointing health care capital equipment sales generated concern about such hospital investments, Ogilvie doesn't think GE's story was a market-wide phenomenon.
  • In a note to clients, Ogilvie said his channel checks show lenders are requiring additional assets to secure loans, and hiking rates for hospitals with mediocre credit, but "that has not slowed purchasing in general.
  • He also said hospitals are rushing to take advantage of the March 2008 economic stimulus package, in which Congress doubled hospitals' potential deduction for equipment expenses to $250,000 through the end of the year.
No position

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