Medtronic Inc (MDT)

This has certainly had its good days. It’s been quite a good company for many years. He likes the medical technology space.

(A Top Pick May 25/16. Up 7%.) He really likes the medical device space. If he were to buy something today, he would probably buy a Stryker (SYK-N). The nice thing about devices is that it is not completely dependent on insurance pays. If you would like the whole sector, you can buy the ETF IHI-N.

They have struggled over the most recent years after being a darling. There is the question of how healthcare will be paid for in the US. Device companies have the hardest headwinds. They are also in a very competitive area. It is not expensive and is a perfectly good way to be in the health care area. Their struggles may mean they have more upside potential if the healthcare sector improves.

(A Top Pick May 13/16. Up 2%.) The leading medical device company. He owns it because they have a plethora of products right across the range. They had a bit of an earnings hit in the 3^rd quarter, and he bought more. He has a $92 target on this.

There has been some major earnings volatility around this one recently. So he has backed off. They have a mid- to high- single digit earnings growth rate, but you are paying twice that. The PE to growth rate is too high. You are paying top dollar for the growth you are getting.

This has everything you can think of that is tools related, from your head all the way down to your toes; cardiovascular, stent. The dominant player in medical technologies. Trading at 17X next year’s earnings. Had a hiccup last quarter, but all they had to do was show that things were back on track. He likes this.

(A Top Pick Oct 11/16. Down 9.87%.) For the most part of 2016, there was a rotation out of Pharma and into medical devices. Great company, well-established and a good yield.

He likes healthcare “devices”, because it is the area that is least likely to be attacked by a government. They are somewhat less regulated from a price standpoint. This company has very strong market share in rhythm devices. Earnings for the year should be up about 7% over last year, but should accelerate up to about 11% next year. It has consolidated between $80 and $90 going back to June. Sitting at around the 150 day moving average, so technically is in a good spot. You should see earnings accelerate going forward, which is what he cares about.

Seasonally, this doesn’t do too well at this time of year. That is pretty common for all the healthcare instrument stocks in general. Technically it is developing a downward trend and recently broke 2 support levels.

A medical device business, one of the largest in the world. A very diverse product line. Valuation at about 18X earnings, the high end of the range, but medical devices are trading at a premium to Pharma. He sees single digit revenue growth and double digit earnings growth, and expects some real growth to come out of things like aortic valve replacement. Dividend yield of 2.07%.

Has a target price of $98, so there is decent upside to it. They are talking about launching a robotic surgery system, so that is something to keep an eye on. It is not at the top of his list, so he wouldn’t be adding to it here.

In general he has been cautious on Biotechs, but this is a medical devices company. It is very, very solid. In the next 5 years it should be growing revenues at mid-single digits. Earnings at low double digits. Dividend yield of 1.96%.

The medical device companies have done a lot better this year, versus pharmaceutical companies. If you are buying shares of a healthcare company right now, he would buy a pharmaceutical name or his Top Pick at the end. (See Top Picks.)

A healthcare company, but not a pharmaceutical company. They are very big in cardiovascular and diabetes. Growing their top line at roughly 5%-10% per annum, and the bottom line closer to 12%-13% for the foreseeable future for the next 4-5 years. They are in the right place at the right time, and are likely to return about $1 billion a year to the shareholders for the next few years. They are committed to increasing their dividends. Dividend yield of 1.98%.

(Top Pick May 13/16, Down 9%) They gave positive guidance last earnings report. Healthcare stocks are starting to work over the last two to three weeks.