Medtronic Inc (MDT)

$80.49 model price, 10% upside. He is positive on it and would buy it here.

Likes the space they are in. It is knees and spines, which plays into the aging demographic’ profile, and as the US and other economies improve, that will be directed into some of these areas as a somewhat discretionary spend. Prefers Johnson & Johnson (JNJ-N) which has the medical devices division. If their acquisition goes through, it will be a positive. She would wait for it to pull back a little.

(Market Call Minute.) Loves the health care in the US. He is playing this through C. R. Bard (BCR-N) and Zimmer (ZMH-N).

Used to be a dividend aristocrat in that it paid an increasing dividend every single year, for a long period of time. Good balance sheet, leveraged to the tool market in the medical space. Somewhat slower growth during the recession. They are acquiring Covidien (COV-N) and will re-base in Ireland giving them lower taxes. This will accelerate their growth. Longer-term, if you buy the story, you’ll be okay, but it is a multi-year story. A slow growth story.

On the cusp of a transformational acquisition, the $43 billion purchase of Covidian (COV-N). This changes their headquarters with a tax inversion deal, making Covidian a 30% owner of the new Medtronic. In order for a tax inversion to take place, you have to own at least 20%, so maybe the extra buffer of 30% will appease regulators, and keep everybody happy. This would allow them to have foreign profit, somewhere in the realm of about $14 billion, and be able to re-disperse them among their existing shareholders. A good line of sight for a growing dividend, further share buybacks, as well as future tuck in acquisitions. This deal would make them the biggest and most diversified medical devices company globally. Also, developing a series of new products. Yield of 1.97%.

Is this a good time to get into health care stocks and what would you recommend? Likes Abbott Labs (ABT-N) very much. Spun off their pharmaceutical R&D business about 2 years ago and split themselves up into 4 different divisions. If looking at global healthcare companies, you can’t go wrong with something like Johnson & Johnson (JNJ-N). Products are cheap and they can easily raise costs. Also likes Medtronics (MDT-N) which is a device manufacturer.

Likes the company and if you are comfortable with this, he thinks the medical device space is very positive demographically. You could hold this for the longer-term.

Done well, constantly makes money. Incredible debt load relative to revenues. Insiders have not really been selling. Great company and pays a nice dividend but he would be looking to sell it - next year to defer tax.