Rule #1 Finance Blog

With Investor Phil Town


Remember our Stryker Homework? Here’s a followup from Lyn:

"I did a little more research on Stryker and found out that the
earnings dip in 1998 and 1999 were due to the acquisition of Howmedica
from Pfizer.  And last year Stryker acquired SpineCore, Inc. and
reported only 3% growth but the underlying growth was 29%.

The orthopedic implants industry itself may have a slight slow
down due to pricing power but in the Grand Scheme of things they are
talking only about 1% or 2% which is not a dramatic change.  Styker as
a company itself has been conservative with their pricing
increases.  So even if a 2% price increase goes to 0% it really will
not affect their ability to continue their 20+% growth.

So this company is looking more and more like a Rule #1 Company!  Am I missing anything important?"

Nope. And then she asks whether, if the price starts to move up, we
should jump in.

Answer:  We only go when the big guys go.  We’re
trying to buy something that is going to go up 50% in a reasonably
short time – a few months.  It won’t do that without Institutional
money piling in there,
so there isn’t any real point in trying to get in
way before these guys do.  So wait for the arrows or, if you are on
MSN, watch the three Tools:  MACD, Slow Stochastic and Moving Average.