Bookkeeping: Cutting Back Thoratec (THOR) Ahead of Earnings; Some Quality Systems (QSII) as Well

I am cutting back the majority of my Thoratec (THOR) position ahead of earnings Thursday - this is a nice little medical equipment company that has become rich (at least in my eyes) at over 40x forward earnings. In this market 40x can become 60x in the snap of a heartbeat but it is what it is.... I am going to lock in the gains, reduce to a 0.2% stake and see what earnings brings. I will hope for a pullback and if it runs away, I guess in this market you can buy things up 30% on the greater fool theory that someone else will take it off your hands a few days later even higher.

Thoratec Corporation, together with its subsidiaries, engages in the development, manufacture, and marketing of proprietary medical devices used for circulatory support. It operates in two divisions, Cardiovascular and International Technidyne Corporation (ITC).

I also cut back Quality Systems (QSII) which might have the prettiest chart of them all. QSII is "only" at 33x forward estimates - i.e. dirt cheap in this market of paper printing properity. If the Treasury allows Goldman Sachs to take the market down after the stress test results, maybe we can buy lower. Otherwise I guess we'll pay up to buy it at 50x forward earnings at S&P 1100.

Quality Systems, Inc. engages in the development and marketing of healthcare information systems in the United States. Its system automates various aspects of medical and dental practices, and networks of practices, such as physician hospital organizations and management service organizations, ambulatory care centers, community health centers, and medical and dental schools. The company offers proprietary electronic medical records software and practice management systems under the NextGen3 product name.


I don't know when valuation mean anything again, but I just saw on the Bloomberg website Europe indexes are now at 4 year highs in terms of valuation... in commodity world I get the concept - you want to buy when valuations are expensive and sell when they are cheap; but in the rest of the market it is not supposed to work like that. But it is. This has to be the first recovery you can buy both early cycle stocks at the same time you can buy mid to late cycle commodities - it's the return of the Goldilocks economy. This must be one of the most epic V shaped recoveries of all times coming in "4-6 months". I might have to replace Kool Aid with Green Shoots.

[Feb 19, 2009: Thoratec Acquires Heartware]
[Feb 6, 2009: Thoratec Beats; Market Yawns]
[Dec 5, 2008: Thoratec with Positive Data]
[Oct 30, 2008: Thoratec Smashes Earnings; Somehow Guides Up]
[Aug 4, 2008: One for the Radar - Thoratec]

Long Thoratec, Quality Systems in fund; no personal position