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Author: levi2 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74345  
Subject: Denny Date: 3/7/2006 3:35 PM
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What's up with Arm? I'm getting about as disgusted as you. Also just wondering if you bought any ISRG now that it is @ 88. I'm thinking with a little downward pressure on the market, and maybe some negative news might do on down to around 60 maybe. Then we could call it a crash & jump on board, huh. Like your posts.

..........lurker levi
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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26312 of 74345
Subject: Re: Denny Date: 3/7/2006 4:16 PM
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What's up with Arm? I'm getting about as disgusted as you.

..........lurker levi


Up? Don't know. Down? Stock price :(

On the UK ARM board:

http://boards.fool.co.uk/Message.asp?mid=9860700&sort=whole


Also just wondering if you bought any ISRG now that it is @ 88. I'm thinking with a little downward pressure on the market, and maybe some negative news might do on down to around 60 maybe. Then we could call it a crash & jump on board, huh.

Not yet. I'm wondering how far it will drop. Over $5 in cash, no debt. Anywhere below 80 should be attractive.


Like your posts.

Thanks!

Denny Schlesinger


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Author: TAR12 Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26313 of 74345
Subject: Re: Denny Date: 3/7/2006 6:28 PM
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Denny

Truly enjoy your posts and levity. But I recall that you posted 88 as the number that was attractive to enter, I could be wrong. What changed to lower the entry point? The company still has moat, increasing sales and have added 1/3 to the price of their machines going forward as well as potential 33% more recurring revenue on new machines going forward with the fourth arm added to the new daVinci S? After a slow two quarters in terms of new sales -- upgrade questions to new model on expected orders -- shouldn't ISRG surprise again by the end of the year?

Please tell me you have better investments in mind, and if so what they are.

Thanks again,

T. Allan

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Author: dumaflotchie Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26314 of 74345
Subject: Re: Denny Date: 3/7/2006 9:14 PM
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OK...I'm not Denny but...here's my 2 cents FWIW.

ISRG is not a secret to anyone at this point....the whole universe of investors has likely seen something about this company although many may not understand its business and market drivers.

From an FA perspective, it trades at a significant promise (forward PE 46), it is in an industry that is continually under cost pressure, its market drivers outside urology are less celebrated, its cost effective advantages are not overwhelming but promising, institutions are already all over this stock at 70% ownership. It does have the only act in town.......strong moat for sure. I would suggest that as much as we would like to know ISRG's potential from an FA perspective.......not possible. DCF analysis.....full of assumptions that we can not be privy to.

From a TA perspective, it is a couple big gaps back there to as low as $50.....certainly a back fill to around $73 makes easy sense IMO:

http://www.stockta.com/cgi-bin/analysis.pl?symb=ISRG&num1=6&cobrand=&mode=stock

Furthermore, I believe one does one a favor by resisting the temptation to average down if one stays with a buy rule that requires a stock be above its 200 d MA.....thsi one still applies but the price is falling like a rock. We are also entering a historically challenging time of year for stocks.

In short.....IMO.....wait to see the whites of their eyes.....at $73.....can see pretty well......at $52...see all white. Hedge a little if one must.....but me thinks there may still be downside here and I have known to be wrong :)

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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26315 of 74345
Subject: Re: Denny Date: 3/8/2006 3:27 AM
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Truly enjoy your posts and levity. But I recall that you posted 88 as the number that was attractive to enter, I could be wrong. What changed to lower the entry point?

T. Allan


Thanks! Yes I did say 88 but as I keep looking at the company I'm having a hard time pulling the trigger. First I learned about the forward P/E and that put a damper into my enthusiasm. Next, TA tells me about the huge gaps at around 50 and 70. Also, the stock has been a 20 bagger already for some people. I could be wrong, but from reading this and the ISRG board I get the feeling that there is still a lot of resistance from doctors to change their way of operating. All this sums up to a gut feeling that is telling me to wait.

The company still has moat, increasing sales and have added 1/3 to the price of their machines going forward as well as potential 33% more recurring revenue on new machines going forward with the fourth arm added to the new daVinci S?

Cost is a problem. Adding to the cost does not propel penetration, on the contrary, it makes it more difficult to fit into the budget. A 4th arm at the same price would have been a better deal in the long run, IMO. This business should depend more on consumables than on machines sold, the more people treated the more consumables you sell and they don't go into the capital budget but into the patient's bill.

After a slow two quarters in terms of new sales -- upgrade questions to new model on expected orders -- shouldn't ISRG surprise again by the end of the year?

Maybe but maybe the tax thing will weight more as the negative.

Please tell me you have better investments in mind, and if so what they are.

My most exciting investment at the moment is First Marblehead. Just today it moved into first place in my portfolio with the drop in ARMHY and the advance in FMD driven by the securitization news.

As compared to ISRG, FMD represents a mass market product that does not have the same kind of resistance as medical equipment and medical procedures have. In private student lending it seems that everyone is in favor. The students need the money, the schools need the students, the banks need to make loans and the capital markets need assets to invest in. First Marblehead is in the sweet spot making it all happen and is making money hand over fist doing it. Also, insiders still own around 60% of the company and the stock has not been a 20 bagger already, on the contrary, it is barely double the IPO price, it has a forward P/E of around 12 and is paying dividends with a yield of 1.1%

You see how different the picture is? Now, if ISRG had a forward P/E of 12, that would be a different story. The problem is that expectations have already driven the price too high. It might not come down in which case I'll have to be content with investing elsewhere.

Denny Schlesinger

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Author: TAR12 Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26316 of 74345
Subject: Re: Denny Date: 3/8/2006 8:24 AM
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Denny

Thanks for your thoughtful reply. I may have spent too much time analyzing ISRG, but the business concerns are not that much of a barrier to me. I am considering adding to my position (in at 40 last year). As to some of your concerns regarding price--this is not a barrier to sales; institutions such as hospitals will pay anything for equipment, and for those institutions that have surgeons asking for something--they spend the money. Additionally, the hospitals in major cities are competing to have these machines and are beginnning to advertise them. Additionally, the adoption rate of the technology is surprising to me-- almost 1 in 5 of the radical prostectomies (sorry if the procedure is misspelled) in 5 years? My only problems so far have been trying to determine the rate of recurring sales growth in relation to the installed base, but even if recurring revenue grows in direct line to installed sales, the growth is phenomenal-- but I believe that the recurring revenue will grow at a greater rate.
The forward P/E is hard to guess, but I think the increased revenue from sales will keep the forward P/E in line with present, despite taxes. Although seemingly high, the company still has 5X growth to corner the prostate market, with other surgical procedures to come on line in the next five years it will be interesting to watch.

Even with that said, I can see the share price drop after a slow 1st quarter earnings release. Following that, the next three quarters will surprise. Only time will tell, but 70 may be a better target after the next earnings release.

Thanks for FMD- I agree with your analysis on this as a purchase now, and will be looking to change some positions in May, and this is one that has been on my watch list since the discussions. Moreover, the politics of educational finance will push even more of the cost onto students backs and tuition will rise even more- the cuts to grants to students and the cuts to university funding are real, and likely will not be replaced in the near term. I see new lawyers coming out of school with 6 figure sl debt. FMD will grow, and their service is invaluable (banks do not want to do the work--outsourcing is the trend and it won't go back.)

Take care, and thanks again for your thoughts.

T. Allan

BTW, if you keep an eye on growth opportunities, watch for biotech SNMX at the end of 06 early 07 when they start recieving dollars from their product in commercial use.



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