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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: of 74344  
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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