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Author: TMF42 Big red star, 1000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77  
Subject: Un Port Buy: Medtronic Date: 11/18/2010 1:50 PM
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Hey Fools,

I wanted to share a good post pointing out one of the risks inherent in the industry and faced by Medtronic specifically.

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"The point I would make about MDT is that I worry it has in fact been losing some significant market share in its core, heart-related-devices business -- I just remember reading an article that mentioned that, that's literally all I know. In that sense it could be a value trap I suppose, and since I'm interested in the stock I would love to hear more from someone who knows something about that."

- dumberthanafool

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Here was my response:

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dumberthanafool:

You're spot on -- most investors are concerned and focusing on the troubles in some of its heart- and spine-related strongholds.

My take on these things has three parts:

1. There is some natural ebb and flow to which company has the "top product" at any given point in time. St. Jude, right now, has the new must-have, as it turns out. However, if you look at Medtronic's marketshare over time, it has retained its #1 position by a wide margin, even though its actual share may tick up or tick down in any given quarter/year.

2. It's imporant to understand the sales process for these types of products. In most cases, we're talking implantable devices -- cutting open a human and putting a high tech device inside. Talk about risks! Doctors don't want to screw this up (there are huge lawsuits, not to mention bad patient outcomes if they do). As a result, switching to a new product is a tough sell and gives massive advantages to incumbents (like Medtronic) with a dominant position and many installed devices. But, Medtronic can't rest on its laurels.

3. The long-term success in this industry will be determined by innovation. As my article notes, I think Medtronic has the edge because of its size -- it can invest more dollars than anyone else. I also like how innovation is tied throughout the culture of the company.

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And if it wasn't clear in the article, I think these fears are known and price into Medtronic stock. It's just too cheap. The risk reward is in our favor.

Bryan
TMF42
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