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No. of Recommendations: 5
I more than doubled my holdings of BSX this past week. Not an easy decision considering this stock's chart and the company's poor management, IMO. Here are my reasons for making this move:

- BSX trades well below its $45 high a few years ago due to stent competition, FDA warnings, patent litigation, and the highly dilutive GDT merger.
- The warnings are now resolved and the stent market appears to have stabilized. New stents by MDT and ABT are turning out to be not much of a threat. Boston Sci's profit margins expanded significantly in its latest quarter.
- The valuation is lowest among the major medical device makers at 13x operating cash flow and 3x sales. BSX has negative tangible book value due to the massive amount of goodwill coming out of the GDT merger. Its earnings are depressed with large amortization charges and interest expenses because of the merger, along with the purchase cost of GDT. So price/sales and cash flow are the valuation metrics most representative of Boston Sci's operations.
- Boston Sci is reducing debt using its ample cash flow, so EPS will improve in coming years. Debt is high at $8.9 billion but not out of the ballpark - Medtronic has $5.6 billion in debt, although it has twice the market capitalization.
- Insiders have been buying stock in the $15 range.

I don't see many catalysts for this stock to move up, but not many for it to decline further either. The company has some interesting new products in development, which might pay off in a few years. There's also the risk of lower Medicare reimbursement rates for device makers, which is a risk the whole sector faces.

All in all, BSX should be able to make a run for the $20s if it manages its finances well. Any potential good news could also have an impact.

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