Since acquiring a maningful position in this stock, Institutional ownership has increased from 31%to 51%. In spite of the fact that it seems that ownership is increasingly moving into stronger hands, the stock has become increasingly volatile. One need look no further then the swings that have occured over the past month. At first, I thought it was the result of the recent turmoil in ISRG, but that stock has settled down. I realize that each time recently that the stock has approached $11.50 pps, our RSI exceeds 70 and we back off. Any thoughts would be appreciated.
Hello endo, I'm afraid I don't have a lot to add. I don't have any explanation for the volatility although I don't tend to let volatility bother me when I'm holding shares for the long term. I believe that NVDQ is still on track. I wish there was more info on the end of the KCI deal. I have written before that I have some concerns about NVDQ's ability to build their own sales force. I have absolutely no reason to believe they will not do it well but it is a risk. Their ability to do so is unknown. Also even if they do it well, building a sales force from scratch takes time, so I am somewhat skeptical that going it alone will be faster. Of course this depends on what changed with KCI's plans that caused them both to reassess. Did KCI pick up a bigger fish? Was there a misunderstanding regarding the timeline? Did it turn out to require more resources than anticipated?
Having expressed these doubts, it is important at this stage of market development not to be hindered by a partners inaction. I'm just a little surprised that would be the case so early into the partnership. They don't seem to be hiding any big dark secret but it would be nice to know more. I recently went through a similar circumstance with SSYS (a 3D printing company). They signed a deal with HP which seemed to be an amazingly positive development but due to chaos at HP it turned out to be a bad deal. SSYS dissolved their partnership and they are doing well but unquestionably being tied to a bad partner slowed them down at a very important time in the adoption of 3D printing.
I'm still very optimistic about NVDQ but I will be watching to see how their sales force develops
Thanks for the input. Today was another perfect example of the oddity of the recent trading. I happened to be watching the stock on level II. It was around 3:45pm and the stock had traded 560,000 shares to that point. The bid was 9.87 and the ask was 9.88 when a single trade for 500,000 shares went through at $10.00. Probably took at least a couple of days to set up that trade, although I have to admit that my insight into how these market makers operate is poor at best.
As an aside, one of the risk associated with the company starting its own salesforce is substantially reduced because many of the prospective buyers are already familiar with NVDQ's products and the cost benefit of those products. For the most part the sales pitch for all the products is pretty much the same.
You two have touched on the critical metric for NVDQ. The adoption curve inputs are Value added to the surgeon--Very high--7 out of 10. The cost both capital investment and per operation "Kit" cost---flexible plans have made the captial cost very attractive for those hospitals not willing to make large investments in new technology--8 out of 10, the kit cost is very small ~$250-$1000; considering the confidence it gives the surgeon of his efficacy, and the data that shows the cost benefit from less return surgery at ~2.5-3 to 1 is a very strong factor in the hospital administations decision as they ussually bear the full cost of return/repair surgeries not to count their reputation--9 out of 10. Manufacturing, the ability to supply the product quickly once orders recieved is well in hand as their capacity to manufacture/assemble these machines is multiple times their current demand and can be easily scaled up with other shifts if needed--7 out of 10.
Now for the critical pinch point in the chain--Sales persons. I was suprised when during the last conference call they announced 10 marketing and sales persons hired for the new Pinpoint launch. I was expecting half that amount. They stated that after ~6-9 months training their sales persons are expected to produce ~$1 million in revenue per person per year. There was a Message Board entry from a person in a hospital who had a friend who sold Da Vinci's that indicated NVDQ had put on the street they were looking for 50 new sales persons. If that blog was accurate, then NVDQ not only knows this is the pinch point but is putting their cash reserves (~$50 million) into removing it. I don't think we will see any difinitive financial results for at least a year, but watch what they say concerning Pinpoint sales and hiring this conference call. If Pinpoint exceeds 10 or new sales persons exceeds 20 jump in with both feet. I think there are one or more institutions that have done the same analysis.
I recall NVDQ management saying that ISRG provided invaluable guidance when they were setting up their supply chain. If you have seen ISRG's high and improving margins it is glaringly apparent that they really have their act together on this front. Here's hoping that ISRG is providing expert guidance regarding NVDQ's sales force as well. Of course ISRG had a direct interest in their supply chain and a much less direct interest in their sales force. In fact making sure that their suppliers own supply chain is top rate is precisely the kind of attention to detail that makes ISRG so profitable.