Motley Fool: Intuitive Surgical could be good bet
When Fool co-founder David Gardner first recommended Intuitive Surgical (Nasdaq: ISRG) in 2005, it was trading at $44. Recently the stock was near $435. Despite its meteoric rise, there’s still room for growth. Intuitive’s minimally invasive robotic surgical system continues to find increased acceptance for more clinical applications and to see increased use in the U.S. and abroad.
The number of surgical procedures performed with Intuitive’s da Vinci system in the quarter ending Sept. 30 increased about 30 percent year over year. But the real growth potential is in its adoption and use beyond just hysterectomies and prostatectomies.
Those two procedures represented about 75 percent of all da Vinci procedures performed in 2010. Yet in the U.S. alone, Intuitive has FDA clearance for another dozen surgical applications – and worldwide, the system has reportedly been used to perform nearly 100 different types of surgeries.
With increased adoption and use of the system, recurring instrument and accessory sales (for items that wear out with use in surgery) and higher-margin service contract renewals should continue to grow.
Intuitive’s expected growth rate exceeds those of other established medical technology and device companies. Investors willing to take on some risk might want to consider it.
Ask the Fool
Q: When selling a stock, how do I determine my cost basis and my gain? – D.Y., San Ramon, Calif.
A: Imagine that you buy 100 shares of Sisyphus Transport Corp. (ticker: UPDWN) for $40 each, paying a $15 commission. Your cost basis is the purchase price ($4,000) plus the commission, or $4,015. The basis per share is $4,015 divided by 100, or $40.15.
If you eventually sell the shares for $50 each, or $5,000, subtract the $15 commission and your proceeds will be $4,985, or $49.85 per share. Your taxable capital gain will be the difference – $970, or $9.70 per share.
Q: How do companies decide how much to pay out in dividends? - R.B., Topeka, Kan.
A: It depends on how management thinks it can best use the firm’s profits. The money might be used to pay down debt, to buy another company, to build more factories, hire more workers or buy more advertising, among other options. Such uses can reward shareholders even more than dividends would, by making the company more valuable. Still, managements often opt to pay out a portion of earnings in dividends, especially when they don’t see more compelling alternatives.
(Young or rapidly growing companies often don’t pay dividends, preferring to spend all extra cash fueling growth.)
Dividend amounts tend to stay put for months or years. Healthy, growing companies will usually up their dividends periodically. Caterpillar, for example, has hiked its dividend by an annual average of 10 percent over the past decade.
If you’re looking for promising dividend-paying investments, take advantage of a free 30-day trial of our “Motley Fool Income Investor” newsletter (www.incomeinvestor.fool.com) and you’ll be able to see our long list of recommendations.
My dumbest investment
Prior to the dot-com bubble that burst in 2000, I was maxing out my investing in stock options for Sun Microsystems, as an employee there. Every penny I could put in went toward buying stock. We’re talking about stock prices up to $130 per share. Well, you know the rest. By the time I sold, it was at $3 a share. I wish I had some perspective then to see that I needed to get out a long time prior. Oy. – F.M., online
The Fool responds: Oy indeed. It’s true that you know your employer better than you know most other companies. But to have most of your assets in it is a mistake. Think about it this way: It’s providing your income already. So if it hits a rough patch, not only might your job be in jeopardy, but your stock could take a hit, too. Don’t set yourself up for a terrible double-whammy.
Regarding the bubble, you weren’t alone thinking that stocks that had skyrocketed would keep doing so. But they rarely do. Focus on what a stock is really worth, not its momentum.