I’m evaluating all my holdings, and I’m going to start with the largest. Right now, that’s Intuitive Surgical, which makes surgery robots.
Here’s my comment from October 2006, when I bought it:
“I also bought Intuitive Surgical (ISRG ), which makes a surgical robot system. They’re way overpriced, and not normally the kind of stock I go for. (I tend toward kind of boring, predictable companies.) These guys are probably worth about $75 a share, and it’s selling at $110.”
Hmmm. Not super useful. I bought twenty shares at $103.50, and I must’ve liked the idea after a little more research, because a month later I bought another 20 shares at $97.21. Right now it’s $348.07, so I’m feeling pretty smart.
What’s it worth?
Revenues have grown at 64% and 61% the last two years. Nice! Clearly unsustainable, though, and net income is growing at a much slower rate — though that seems to be largely because they’re paying income taxes now and they didn’t three years ago. The balance sheet is really good, and cash flow looks good. I see $200 million in cash going to “investments,” which worries me a little without knowing what the investments were (AOL used to call those free CDs “investments”), but I’m going to pretend they’re good rather than do research.
There’s still room to grow (market cap is $13 billion), and near as I can tell this is still a relatively unknown company.
Insiders seem to be selling off quite a few shares, and the officers don’t hold that much stock in the first place.
By my calculations, ISRG is worth maybe $220 per share, so the current $348 is even more overpriced than when I bought it. Too overpriced? Maybe not. My gut inclination is to sell half, reducing my exposure. On the other hand, ISRG, while my largest holding, is still less than 10% of my total stocks, so it’s not like that stock plummeting suddenly will give me ulcers. My tendency to sell half of stocks that have risen higher than I thought they should has turned out well sometimes, and poorly others.
Another factor is that ISRG is not in our IRAs, but in a taxable account, so the profits from selling it will be reduced. (By 15% for long term capital gains? That’s not bad.) Maybe I’ll stall until I evaluate a sell a couple of my crappy stocks for a loss, and use those to balance each other.
OK, I just put in a limit sell for half of my shares (20) at $360. That’ll lead to about a $5,000 taxable profit, so my goal in the next few days will be to shed $5,000 worth of losers to balance it out. Now that I look, I don’t even have $5,000 worth of taxable losses, so I guess that’s not going to happen.