Eye on Insiders: Intuitive Surgical

Watching insiders is like participating in a weeks-long stakeout. You expect something to happen, but you don't know what. So you settle in, sip your coffee, and wait for clues to solving the big case.

Here, the "case" is direction: Which way is your stock headed? The "clues" come in the form of insider buying and selling action. Have a look at the action at Intuitive Surgical (Nasdaq: ISRG  ) over the past year.

Insider Rating

Neutral
High volume of insider selling, but by only one board member who maintains a hefty stake.

Business Description

Creator of the minimally invasive daVinci robotic surgery system and a leader in using robotics to transform surgical procedures.

Recent Price

$218.70

CAPS Stars (Out of five)

****

Percentage of Shares Owned by Insiders

1.55%

Net Buying (Selling)*

($7.57 million)

Last Buyer (% Increase)

None over the prior 12 months

Last Large Sale (% Decrease)

Robert Duggan, director
5,000 shares at $196 apiece on Nov. 4, 2008
(Sale represented 3% of remaining direct holdings)

Competitors

Hitachi (NYSE: HIT  )

CAPS Members Bullish on ISRG Also Bullish on

Johnson & Johnson (NYSE: JNJ  )

CAPS Members Bearish on ISRG Also Bearish on

First Solar (Nasdaq: FSLR  )
Ford (NYSE: F  )

Recent Foolish Coverage of ISRG

The Impressive Number No One Is Talking About
A Good Quarter for Growth
Of Robots and Rocket-Powered Returns

Sources Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of July 28, 2009.)
*Open-market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times, they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Personal holdings matter most -- they represent the stock executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: Neutral
Intuitive Surgical is the sort of stock that our Motley Fool Rule Breakers subscribers love, and which drives everyone else crazy. Just look at its trading range. Over the past 52 weeks, Intuitive Surgical has traded for as low as $84.86 a share, and as high as $319.80 a share.

Go ahead, get your glass of water. I'll wait. Numbers like that beg for a proper spit-take.

What's interesting to me, and why I rate Duggan's selling "neutral," is the pattern -- or lack thereof. If anything, you might call Duggan's selling a contrarian indicator.  Between August and November, he sold 39,100 shares of Intuitive Surgical. Only 4,000 of those stubs trade for less today.

Growth stocks can be like that. In Intuitive Surgical's case, better-than-expected earnings reports are fueling gains. But don't feel too bad for Duggan. According to the latest Form 4 he filed, he still holds 139,977 shares directly, and 7,725 shares via a managed account.

Duggan could be well-positioned for the long term. An aging population is more likely to need surgical and other medical services from the likes of Intuitive and industry peers such as Accuray (Nasdaq: ARAY  ) and Varian Medical Systems (NYSE: VAR  ) . "Look for this company to outperform over the next 5+ years," wrote CAPS investor sindelar14 earlier this month. "The da Vinci Surgical System is one of a kind, and you cannot take away the importance of its need."

Agreed, but that's my take. Do you agree? Disagree? Log into CAPS today and tell us how you would rate Intuitive Surgical.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand.

Get more of the inside scoop with related Foolishness:

First Solar and Intuitive Surgical are Rule Breakers recommendations. Johnson & Johnson is an Income Investor pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


Read/Post Comments (4) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 28, 2009, at 9:34 PM, PauvrePapillon wrote:

    “An aging population is more likely to need surgical and other medical services from the likes of Intuitive and industry peers such as Accuray (Nasdaq: ARAY) and Varian Medical Systems (NYSE: VAR)… The da Vinci Surgical System is one of a kind, and you cannot take away the importance of its need."

    These are both good observations but, for investment purposes, we should also note that Intuitive Surgical and Varian already have large installed bases. This is great for stability but the flip side is that the greater opportunity for growth lies with Accuray, which also has a one-of-a-kind technology with an even greater impact in terms of saving lives – it gets to tumors that neither surgery nor Varian’s conventional gantry-mounted radiation sprayers can.

    When the market (correctly) understood that CyberKnife is a truly unique and revolutionary technology, investors bid Accuray’s post-IPO shares up to an intraday high of $31.09 (9 February 2007). As Varian and others made repeated claims, in numerous press releases, interviews and conference calls, that their gantry-mounted machines could do the same thing as the robotically controlled CyberKnife, Accuray’s market cap shrank even though its economic fundamentals actually improved.

    On 6 December 2008, Accuray, finally, fired back with the release of two animated videos that effectively demonstrate what CyberKnife is and why it is fundamentally different from gantry-mounted radiation sprayers. You can see them for yourself at http://www.accuray.com.

    Since then, Accuray shares have gone up 68.78 percent; Varian’s shares have gone down 8.49 percent while the NASDAQ is up 30.94 percent as of close of market today (28 July 2009).

  • Report this Comment On July 29, 2009, at 4:20 AM, GoNuke wrote:

    Da Vinci machines still do not reduce the real cost of surgery. Fee schedules set by HMO's and governments aren't high enough to pay for Da Vinci surgery.

    Intuitive Surgical needs to make some breakthroughs on cost cutting if it is going to prosper over the next few years.

    Very few Da Vinci machines have been exported because the rest of the world pays less for surgical procedures. The Da Vinci machines cannot compete. If the US manages to line up its health care costs with those of the rest of the first world there will be no demand for Da Vinci machines in the US either.

  • Report this Comment On July 29, 2009, at 12:28 PM, CrankyTexan wrote:

    GoNuke, it's even cheaper to avoid surgery altogether. Heck, if costs are your main concern, why have hospitals? Dying saves money. Why bother having state of the art medicine?

  • Report this Comment On July 30, 2009, at 2:54 AM, PauvrePapillon wrote:

    By George Cranky, you've got it. You're now ready to be a community organizer for Obamacare.

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