One Medical-Device Stock to Avoid

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Underperform pick

Company Mako Surgical (Nasdaq: MAKO  )
Submitted By: TSIF
Member Rating: 99.92
Submitted On: 5/23/2011
Stock Price at Underperform Recommendation: $31.57
Mako Surgical Profile
Star Rating ****
Headquarters Fort Lauderdale, Fla.
Industry Health Care Equipment
Market Cap $1.27 Billion
Industry Peers Opko Health (AMEX: OPK  )
Hansen Medical (Nasdaq: HNSN  )
Medtronic (NYSE: MDT  )

Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.

This week's pitch:

Mako Surgical has had an excellent run the last six months and is a 3 bagger for faithful holding longs. Overall they are gaining analyst and institutional support. Some of the rise is the comparison to Intuitive Surgical [ (Nasdaq: ISRG  ) ] which is up 32X since 2003. I'm not sure if the comparison is close and I do understand the value of finding an entry position in a promising equity, but I expect a correction to occur soon.

Mako Surgical continues to lose money and while I agree that when Mako Surgical does book a profit that it will be a nice catalyst for the stock, at this point however the P/B of 11.3, P/S of 26 and the negative cash flow do not support the 3X rise. A 26% short position could cause another spike upward should Mako Surgical issue any "surprises," but overall I believe this run is done. It's hard to argue at times with momentum stocks as the top is very difficult to call, but I think the risk/reward is back down on this one. (Estimating sub $22).

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The Motley Fool is investors writing for investors. Pitches must be compelling, made in the past 30 days, and be at least 400 words. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Medtronic. Motley Fool newsletter services have recommended buying shares of MAKO Surgical and Intuitive Surgical. The Motley Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (13)

Comments from our Foolish Readers

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  • Report this Comment On June 10, 2011, at 7:38 PM, TSIF wrote:

    Thanks for the callout and the "spell check"! ;)

  • Report this Comment On June 11, 2011, at 5:11 PM, matthew2219 wrote:

    This fellow says dump Mako and Rule Breakers, etc. says buy. I wish you guys would make up your minds. I have 3 premium services with the Fool and it is a waste of money if two or more voices disagree. I have only one money. Do I buy or do I sell?

  • Report this Comment On June 11, 2011, at 8:10 PM, TSIF wrote:

    Mathew2219, if you don't use the free CAPs service then I can see where you might get confused, but it's really quite simple.

    If you are following one of the subscription services then it's best to follow it ALL the way. They will be very clear with their updates, buy and sell intents. I have never found the paid services with the paid analysts disagree with each other, but clearly they focus on different metrics.

    Besides paid subscription services, Motley Fool runs a free service that has had some 73,000 people sign up for one or more accounts. The free service is one way they advertise their subscription services, but it generates a "lot of noise" because it's all opinion based by a wide range of mostly amateurs. It's usually pretty clear when an opinion is being used from the free service. The posters will have funky names such as TSIF (The Sky is/isn't falling today).... ;)

    The MF subscription services have some very good analysts with "real names".

    My personal opinion was 'highlighted" for the article because MF has another group of staff writers who pull out opinions from the free "CAPS" service for various types of articles.

    As an investor, you need to be able to stay up to date on your chosen equities, but filter out the "noise". Most of us "CAPS Players" make shorter term calls on how we "think" the equity will perform against the S&P. In the shorter term world there is certainly "noise" that a longer term holder will need to ride through.

    If you're sticking with Rule Breakers or another MF subscription service you are in good hands....but don't expect others of the "fool community" to agree with them. Regarding Mako, it's certainly a long term play. My non-educated opinion is that it shot up too fast and didn't build a base, so until it shows solid earnings it will be volitile. If you're a holder then a 50% spike up in a short time is very nice, but is volitile in a down market. IN the last five days the S&P is down 2%. Mako is down 12%.

    Add in a volitile market and my personal opinion, mixing fundamentals and technicals is that it was/is in for a short term correction. Once it shows earnings, it could indeed spike up nicely and be less volitile as it earns investor and analyst confidence. Again, I'm not an analyst and I'm looking at it on a short term bases. ON my own investments I usually let my core holding ride through volitile times.

    Good luck on your investments.


  • Report this Comment On June 12, 2011, at 12:42 AM, rmiers wrote:

    I never like a "sell story" when it gets too complicated.

    It is tough to sell one new thing. It get much tougher to sell "two" new things.

    I am a original ISRG investor. Sorry to say I didn't buy enough 50 dollar shares (I bought a few at 349 just to say I did)

    Enuff bout me. I have invested in mako early and sold. I bought last week at MF's advise.

    Mako has a potential new joints to sell. Just like ISRG, quicker, faster, no infections, better outcomes, better price points...and the list grows.

    BIG Problem...very their knee superior to the competition???

    Don't think Stryker and Medtronic are sitting on their duffs


    BIG GOODSTUFF, we get bought out

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