An investors time horizon is definitely correlated to risk tolerance & it sounds like you'd be better off with MDT for the divvie (and EW for leaving a beautiful legacy investment to children & grands...)
My optimism is based on the fact that EW has performed admirably under Mussalem for more than 12 years against the likes of MDT & STJ (strong competition) in the tissue heart market.
Now they appear to be holding their own in TAVR which is a new technology in cardiac care.
My bull thesis is based on the aforementioned strong historical performance of EW against competitors with vastly larger resources & also I have a theory that new entrants into the TAVR market (MDT in 2014 & SJT maybe by 2015) will produce a positive effect; somewhat akin to when Lowes builds a store right next to Home Depot (more people tend to visit the area.)
Medtronic's strong sales force will of course go directly after the low hanging fruit of Edwards existing clients but the will also send their more aggressive reps to break new ground with surgeons who are sitting on the fence with regards to performing TAVR procedures.
Hospital purchasing managers will want more than one source (as is shown by European inventories who have access to multiple vendors for TAVR) & some will skew towards MDT & others towards EW.
Lot's of runway left...
The bear case would call for MDT to take major market share from existing EW clients in 2014.
Additionally; we could see longer term problems regarding the efficacy of TAVR similar to studies involving the use of stints in comparison to other therapies.
IMHO; MDT & STJ have invested a bundle in TAVR sooooooo...
Short interest jumped recently with 3+ days at present trading volume to cover (speculators are creating volatility which presents an opportunity for long term investors.)
I really hope EW goes sub $50 before the end of the year in which case I'll double my position through direct purchases & will in addition; go long more LEAP calls
Sentiment: Strong Buy
Mussallem has been the CEO since 2000 & the company has consistently maintained high a ROE/ROIC while employing very little debt.
The recent fears of new entrants into the TAVR market are valid & it remains to be seen if Edwards can hold and preferably increase their market share in TAVR.
Management is naturally going to issue cautious guidance given the overhang of unresolved class action lawsuits by shareholders regarding Sapiens performance in the market.
In my opinion; the lawsuits have no merit.
Sapien has been selling very well into a market with a lot of runway left.
Institutionals have dumped EW for their own nebulous reasons & have created a nice buying opportunity IMHO.
If you understand what the company does & believe that historical measures of top quality management predict more of the same; then it's a no brainer to buy right now.
LEAPS are available if you'd like to leverage some ownership with less risk...
Sentiment: Strong Buy
Yes there is good news!
The company has been hit with class action lawsuits from shareholders who bought on the optimistic guidance issued when Sapien 1st hit the market.
The company has performed admirably in the transcatheter aortic valve replacement (TAVR) market & has managed to delay the 800 pound gorilla Medtronic from introducing its CoreValve product.
St. Jude places a distant 3rd as a ME TOO player...
Before a hospital or surgical group begins offering a new procedure like this; the bean counters need to study whether or not it will be profitable & the legal team will figure the odds on getting sued for killing people.
Next; management has to arrange for new hiring to fill gaps in their skill set (namely evaluation of surgical candidates) & training of the surgical teams (a surgeon or interventionist needs to do about 30 of these procedures to be totally competent.)
All of this takes time...
Right now; this procedure is targeted at individuals who cannot tolerate the trauma of having their chest cracked open for a tissue valve replacement (a market which EW is also a dominant player.)
The TAVR market is far from mature & the entry of new offerings by Medtronic & St Jude will test Edwards sales & support teams as they work to increase adoption rates of the Sapien product line.
Management is being cautious in its guidance because of the aforementioned class action lawsuits.
IMHO this creates a great buying opportunity for anyone with a 10 year horizon who trusts that the 22.9% ROIC & past 10 years of 20% + ROE is solid evidence of a well managed company.
Medtronic paid nearly $1B for acquisitions to enter the TAVR market & EW paid less than $300M & still got the 1st mover advantage!
As a kicker; management has some skin in the game...
I just bought 200 shares & 2 Jan 2017 $70 calls & it's going to turn into at least a years worth of retirement income in another 10 years!
Sentiment: Strong Buy
Does EW's sales & support team provide any services to assist hospitals & surgical groups with training & staffing/consulting needed to offer this procedure?
It would be interesting to know who offers training & how well they are booked up.
Also; are their any quasi-channel checks on hiring of extra personnel by prospective Sapien clients?
I'd love to see that headline.
Here's the scenario:
Icahn invites Cook to dinner again thinking he'll get some for sure this time.
The table is set & Love is in the air.
Carl switches the tunes from ICP to smooth jazz.
During dinner uncle Carl slips his hand under the table & tries to rub Tim's leg & BAM!
Tim says "don't call me again" & Uncle Carl puts his Juggalo outfit back on & dumps his pos for a stake in Pfizer (hoping for discounts on Viagra…)
Uncle Carl is such a #$%$..
Oracle develops & markets software to help businesses manage customers, sales, inventories, processes & social networks (I'm sure I missed a few things but you get the idea.)
They are switching from purely software to offering cloud computing solutions which means they'll need to be able to port existing customers over to a cloud based model as time goes on & it appears as though they are already offering migration paths.
Cloud is important as it allows firms to extend the life of it's hardware by putting the load on remote computing power.
There's a few ways to do this; buy or lease your own cloud hardware & serve it up to users or use someone elses offsite cloud set up.
How cost effective is it to buy or lease as opposed to upgrading thousands of PC's / Macs & managing multiple software packages on all these units?
With cloud computing all software updates are performed at once & nobody gets left out & you can either repurpose or fire some IT guys (so productivity should be boosted.)
They are also using the Sun acquisition to develop software/hardware end to end solutions (hardware is a lot lower margin & sales have been off.)
Management has stated 3 years in a row that indirect hardware sales are hiher than direct sales & they want to change that (last quarters internal sales force had some issues closing sales & hopefully they'll get this ironed out through training & incentives.)
There have been no big wite downs or restatements in the wake of the Sun acquisition & the auditors continue to give unqualified opinions of financial statements & controls so that's a thumbs up!
I'm thinking it's a buy under $27.
$4B in FCF + share repurchases + divvie within next 2 years = value enhancement
Low capex & a merger that could actually work (Management teams often cite "synergies" when what they mean is "wishful thinking.")
In the case of ESRX & Medco; these are 2 business that truly complement each other as they do basically the same thing using different methods & generating different data sets.
In fact; Medco has a larger mail order biz which is more profitable for the company than simply processing pharmacy orders.
Mail order provides lower cost benefits to patients than those filled at a pharmacy.
I think ESRX is going to try & expand the list of drugs it can legally dispense through mail order over the next few years (the Amazon of pharma!)
There will more than likely be restatements of financials when the dust clears.
There will undoubtedly be unhappy employees during the digestion process.
There will also be new efficiencies in the combined entity.
ESRX goal is to improve physicians prescription recommendations (as opposed to being swayed by pharma sales reps) & to enhance patient drug use habits through subtle psychological shifts in the patients perceptions (did you ever wonder why drug companies spend sooooooo much money on TV ads?)
Resless leg syndrome - puleeeeze...
If the new ESRX can drive down drug costs & improve patient outcomes by using its massive data on costs versus efficacy; it will continue to generate strong FCF.
Please short this stock so I can buy more; cheaper!!!
This is not an asset based biz.
Neither is Oracle.
Positive earns & $4B in FCF.
Merger restatements coming.
Air will clear.
ESRX will confound shorts...
Would you like to borrow my shares?
Low capex & great free cash flow!
Modest growth by expanding mail order.
Improved margins after digesting Medco.
Increased share repurchases & dividend initiation after Medco merger reorganization (there's not much else can they spend all that FCF on...)
No business sustains high growth forever.
It's Paz' job now to NOT introduce "New Coke."
Thanks for your comments.
(Even the spammers are avoiding this board...)
By adjacent markets; do you mean mail order?
What other adjacencies do you see?
Tea baggers & left wing whack jobs.
All a bunch of reactive sheep who bleet the opinions of others.
Anyone want to generate some original conversation about Oracle?