(MDT) Archives

Take Advantage Of This Discounted Stock

If you have a solid portfolio that rakes in dividend income every few months, you’re in an excellent position to enjoy an early retirement.

Having a dividend income not only means ensuring that you pad your returns and grow your portfolio’s worth over the years but also eases the pressure to look for other revenue streams.

On top of that, if the businesses you’ve put your money in over the years boost their dividend payments, then you’ll also be receiving more recurring income, making it even easier to retire early.

In the biotechnology and healthcare world, the list of dividend stocks that hold outstanding track records in terms of delivering dividend payments regularly includes Medtronic (MDT). This stock can form part of the pillars to build your strong portfolio and is an investment worth considering for those who aim to retire early.

Medtronic qualifies as a dividend aristocrat, recording an impressive 45 consecutive years of payout increases. Unfortunately, shares of this business have not been less impressive lately. In fact, its stock is down 28% thus far.

At first blush, this stock performance looks discouraging. However, there are reasonable explanations behind it. A key factor is that practically half of Medtronic’s profits come from the international market. Taking into consideration the strength of the US dollar against other currencies, Medtronic’s constant-currency revenue should have risen.

Either way, Medtronic has been active in its research and development plans. In 2021, the company spent $2.7 billion on these efforts. As Medtronic sustains its record of clearing more than 200 regulatory approvals in the past 12 months and with the anticipated cooling off of the inflation woes, profitability will likely rebound.

Nonetheless, Medtronic’s consistent payouts make it an attractive buy for dividend growth investors looking for a stock that can serve as an anchor in their portfolio.

Medtronic offers a 3.6% dividend yield, which is more than twice the S&P 500 index of 1.7% yield. If this isn’t enough to entice shareholders to stay, the company is actually on pace to turn into a Dividend King by 2027. For context, a Dividend King is a stock in the S&P 500 that has boosted its dividend every year for at least 50 consecutive years.

Here’s a quick background on Medtronic.

The company is a titan in the medical device sector, boasting a dominant presence in more than 150 countries and generating a total of roughly $31 billion over the past trailing 12 months.

Its impressive array of products covers insulin pumps, pacemakers, and stents, offering treatments for about 70 different health conditions and reaching more than 76 million patients annually.

It has a solid patent base and stellar track record of medical innovation, equipping it with pricing power and practically insulating the company from headwinds that may affect any of its product categories or territory.

Thanks to its extensive and diverse product portfolio, Medtronic is considered the biggest pure-play medical devices company across the world, recording a whopping $104 billion in market capitalization.

All in all, this medical devices giant continues to be one of the most reliable names in the healthcare industry. Its longstanding history of success, continuous innovation, and solid business model all but guarantee that it can sustain its momentum no matter the economic conditions. While some factors have hurt its near-term performance, it’s clear that these setbacks are temporary.

The dip in Medtronic's share price is good news for long-term investors, especially since the company would recover from the setbacks soon enough. The recent bearishness has turned it into an even better buy, as it’s trading at only 15 times future earnings based on estimates.

A Positive Income Stock That Steadily Delivers

Biotech Letter

Even the most aggressive and high-risk investor would appreciate a passive income.

Now would be an excellent time to consider stocks that could offer robust returns throughout your lifetime for those with some cash stored up.

One stock that fits this description is AbbVie (ABBV).

Spun off from Abbott Labs (ABT) in 2013, AbbVie is widely recognized as a dependable Dividend King thanks to its 50-year track record of consecutive dividend increases. Since going solo, it has boosted its dividend by over 250%.

In the latest report, AbbVie’s annual dividend has reached $5.64 per share and is paid at a yield of 3.71%. This is roughly double the 1.86% long-term average of the S&P 500.

In the first-quarter earnings report, AbbVie’s year-over-year revenue climbed by 4.1% to reach $13.5 billion, pushing its earnings higher by 9%.

However, the company’s shares declined by approximately 10% after these results were released.

While the update wasn’t that disappointing, the impending patent loss of AbbVie’s top-selling rheumatoid arthritis drug Humira affected the market’s perception.

In fact, sales of Humira have already started to weaken, falling by 2.7% year-over-year to report $4.7 billion.

This report is hardly shocking, especially since the drug continues to battle it out against the generic competition.

Actually, Amgen (AMGN) and Biogen (BIIB) already have approved biosimilar versions of Humira out in the market since 2018.

Humira sales are anticipated to continue to fall in 2023 when the drug loses its patent exclusivity. Its competitors have started to apply for FDA approvals in the US for their biosimilars of this blockbuster treatment.

Another reason for the sell-off of AbbVie shares following its first-quarter results is the drop in sales of other products, particularly Imbruvica.

Since the competition in the oncology sector has become more intense, this treatment struggled to keep its share, resulting in a 7.4% decline in its revenue year-over-year to report $1.2 billion.

Although the decline in the sales of any company’s product is never a good sign, it should be noted that Imbruvica has been dealing with various issues even prior to this quarter.

In 2021, the global sales for Imbruvica only exhibited a meager 1.8% increase to reach $5.4 billion.

Like what happened in the first quarter of 2022, this unimpressive contribution also resulted from more intense competition.

The good news is that the critical products anticipated to offset the decline of Humira sales continue to reap excellent results.

AbbVie showed off a 21% year-over-year boost in revenue across its neuroscience and aesthetics segment, which was led by the solid performance of the recently launched migraine drug Ubrelvy as well as the in-demand Botox Cosmetic and Juvederm.

Meanwhile, momentum continues to grow for immunosuppressants Skyrizi and Rinvoq, which are projected to have practically all the major indications earned by Humira.

In the first quarter, Skyrizi sales went up 63.7% to reach $940 million while Rinvoq recorded a 53.6% increase to rake in $465 million.

Looking at their trajectory, both products are estimated to generate over $15 billion in sales in 2025.

These are promising numbers for AbbVie’s immunology segment. Plus, bear in mind that Humira actually hit peak sales in 2021 at $20.7 billion.

That means this treatment can still contribute meaningfully to the company. After all, it’s highly unlikely that Humira sales would immediately drop to zero just because generics start to infiltrate the US market.

Needless to say, AbbVie’s portfolio appears to be increasingly well-prepared for a post-Humira era.

Given that its revenue and earnings clearly show growth, and a strategy firmly in place to continue expanding its portfolio, AbbVie can easily sustain its yearly dividend boosts and offer passive income to its shareholders for many years.

A Biotech Pioneer with an Enduring Legacy

Biotech Letter

Forever is a long time, and the move to buy and hold stocks for good is a decision that should never be approached lightly.

How can you guarantee that a company is capable of delivering solid numbers every year?

One way to approach this is to consider stocks with a long history, especially when these businesses are frontrunners in steadily growing industries that are on track to keep developing and expanding in the next few years.

In the biotechnology and healthcare sector, a name that fits the bill is Amgen (AMGN).

Amgen is a pioneer in the biotechnology sector, with the company developing innovative treatments in oncology, inflammatory conditions, and biosimilars since the early 1980s.

For the past 12 months, Amgen has generated roughly $24.4 billion in revenues globally.

Its first-quarter results for 2022 showed a respectable 6% year-over-year increase thanks to the double-digit growth of its key drug programs. In effect, the company also reported a 15% rise in its adjusted earnings per share.

In particular, the main growth drivers during this quarter are Repatha, which was up 15% to reach $329 million, Evenity, up by 59% to rake in $170 million, and Prolia, up by 12% to report $852 million.

Amgen prides itself on many products, with revenues growing by double-digit percentages, with several newer treatments in the lineup projected to drive top-line growth for an extended period.

Aside from the potential of Prolia, Evenity, and Repatha, Amgen and AstraZeneca’s (AZN) collaborative work, asthma medication Tezspire, and non-small cell lung cancer treatment Lumakras are anticipated to become top-selling products as well.

Approved in almost 40 countries, Lumakras is expected to gain more regulatory approval in the coming years, making the argument for its blockbuster potential stronger than ever.

On top of these, Amgen has over 24 programs queued for clinical trials, with the company continuously bolstering its pipeline.

Meanwhile, its biosimilar arm is growing with 5 high-quality treatments already out on the market and an additional 6 more expected to be launched from 2023 to 2030.

Among the biosimilars in the lineup, perhaps the most exciting and possibly most profitable would be the biosimilar to AbbVie’s (ABBV) mega-blockbuster Humira. Looking at the timeline, Amgen’s candidate should be out by January 2023.

Apart from being a good defensive stock, Amgen is also a great option for income-seeking investors.

This biotech titan offers a 3.08% dividend yield, which is starkly better than the S&P 500’s 1.37%.

Meanwhile, its cash dividend payout of roughly 47.88% is conservative enough to guarantee that the company manages to sustain dividend boosts in the following years.

Over the past 3 years, Amgen’s payouts have increased by 33.79%—and there’s more where that came from.

Lifesaving treatments are crucial to patients, and available therapies for several conditions can always be improved upon. Moreover, there are many diseases with no approved drugs just yet.

In addition, the global population is aging. The number of people aged 60 and above is expected to approximately double by 2050.

This means that the spending on prescription drugs would also go up as the demographic ages.

Hence, companies like Amgen are anticipated to enjoy an even bigger target market in the coming decade.

Those are strong reasons that ensure the longevity of the businesses in the healthcare sector. For high-quality companies, these can serve as excellent catalysts not only for continuous revenue generation but also for potential blockbuster treatments.

As the largest biotechnology company in terms of market capitalization, Amgen continues to deliver positive returns and promise stability to its shareholders amid all the chaos and uncertainties.

With an excellent dividend, bolstered with a solid pipeline, key franchise programs, and lineup, Amgen is a great target for investors looking for stocks to buy and hold for a long time.

May 12, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
May 12, 2022
Fiat Lux

Featured Trade:

(AN UNDERRATED PREMIUM HEALTHCARE STOCK)
(ABT), (DXCM), (MDT)

An Underrated Premium Healthcare Stock

Biotech Letter

The healthcare industry is a complex system. Nevertheless, it's an exciting space filled with opportunities valued at almost $12 trillion globally.

Healthcare needs are practically guaranteed never to disappear. Moreover, there will always be a consistent demand for expansion and innovation as patients look for more effective treatments and therapies.

This could signify several up-and-coming budding companies in the following years.

However, it's vital to keep tabs on the well-established blue-chip stocks in the healthcare world.

After all, these names have proved their worth for decades, evolving with the industry and developing innovative drugs and services to stay at the forefront of the field.

One name that fits that description is Abbott Laboratories (ABT).

There are many reasons why Abbott is an outstanding stock to buy. One excellent reason is its long history, as it goes way back to the late 1800s.

Admittedly, that reason alone isn't enough to promise a bright future. But, the fact that Abbott managed to sustain its growth and remain competitive for decades speaks volumes of the stock's quality.

Another appeal of Abbott to investors, which is unlikely to change anytime soon, is its diversified portfolio. The company produces virtually everything from COVID-19 diagnostic tools to surgical equipment and medical devices targeting diabetes.

Moreover, Abbott has developed a solid relationship with healthcare professionals and facilities. This establishes brand recognition, which arms it with a decisive competitive advantage.

With over $43 billion in trailing 12-month revenue, its portfolio of products is so extensive and popular in the healthcare field that it's difficult to imagine a future where a particular failure in any market would severely damage its share price.

That makes AbbVie a remarkably safer stock compared to many of its peers in the healthcare sector.

The first three months of 2022 saw Abbott Laboratories record $11.9 billion in revenue, showing off a 13.8% year-over-year climb.

The diagnostic sales segment grew with a 32% increase year-over-year, with roughly $3.3 billion of the amount generated from COVID-19 diagnostic tools.

Apart from this, other segments of the business posted good numbers. For instance, the company's established pharmaceuticals and medical device sector climbed by over 7% in the first quarter.

The only business arm that failed to record an increase in revenue is its nutritional segment, which fell by 7% primarily due to product recalls and the unfavorable conditions in the Chinese market.

Although the quarterly revenue of Abbott isn't growing as fast as other healthcare companies, this shouldn't be an alarming concern.

Actually, this is effectively this industry titan's norm.

Besides, the moment a company reaches a market capitalization of more than $211.6 billion, it's challenging to continue making more money at a similar rate as the years when it was a smaller firm.

Meanwhile, a key revenue growth segment for Abbott is diabetes care.

Thanks to its FreeStyle Libre franchise, Abbott has established a notable presence in the diabetes market, particularly in the glucose monitoring (CGM) systems.

Based on the first-quarter report, sales from the diabetes segment jumped by 14.9% to record $1.1 billion.

From this, the FreeStyle Libre franchise raked in $1 billion in revenue, showing off an impressive 20.4% increase year-over-year.

CGM gadgets allow diabetes patients to conveniently and automatically track their own blood glucose levels. Evidently, the fast adoption of this technology is driving sales of the FreeStyle Libre.

Thus far, Abbott Laboratories is nowhere near entirely dominating the CGM market, with the likes of DexCom (DXCM) and Medtronic (MDT) still capable of contesting its market share.

Considering that this is only the first-quarter sales, though, it's incredible to watch how far the FreeStyle Libre franchise could go.

For context, this portfolio brought in annual revenue of $2.6 billion in 2020 and grew by 35.8% the following year to bring in $3.7 billion in 2021.

Finally, Abbott is an excellent option for income-seeking investors. This business is widely considered a Dividend King, increasing its payouts for an impressive 50 years.

Looking at the past five years, Abbott's dividend was raised by over 77%. Given its rapidly increasing cash flow, it's clear that it has a strong capacity to continue paying out dividends.

The market has been experiencing stomach-churning rough patches as more and more companies struggle with supply chain disruptions and increasing interest rates. This is just the kind of environment where Abbott thrives.

This company has a 10-year return of 378% that easily beats the market's 282%, making Abbott a stock that many investors aspire to own.

Between its steadily climbing dividend payouts, consistent flow of innovative products, and the capacity to hold its title as one of the largest healthcare companies worldwide, it's clear to see the reason for investors' confidence in this stock: all these benefits could make any shareholder wealthy over time.

March 1, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 1, 2022
Fiat Lux

Featured Trade:

(THE FUTURE OF SURGERY)
(ISRG), (MDT), (SYK), (ZBH), (JNJ)

The Future of Surgery

Biotech Letter

The healthcare sector is one of the biggest and most intricate industries in the stock market.

It’s a multi-trillion dollar area that offers investors with virtually unlimited opportunities to build a life of financial freedom via sound long-term investing.

This industry has several quality stocks—businesses that offer to cure diseases, develop revolutionary medical devices and treatments, or even just to offer personal care items you purchase from drugstores.

One of the most lucrative sectors of the field is surgery.

Surgery dates back centuries and is one of the oldest practices in the field of healthcare and medicine. Thankfully, its technology has evolved since then.

The surgical robotics market is projected to expand exponentially, and ISRG is in a prime spot to reap the rewards from this impending growth.

So far, approximately 15% of surgeries are already conducted via robots, showing a massive room for expansion as the technology gains traction among the medical experts and patients.

Robotic assistants are gradually entering the mainstream market, opening another revenue stream. Overall, the anticipated market for this field is calculated to rise at a range somewhere from 9.5% to 19.3% from 2022 to 2032.

The growth won’t likely stop there considering the myriad of benefits that robotically assisted surgeries offer compared to traditional surgeries, such as shorter recovery periods and alleviated discomfort among patients.

These advantages make these systems attractive to healthcare providers, especially considering the way the technology optimizes the recovery process of their patients and delivers more precise and safe surgical results.

Today, one of the emerging leaders in this sector of the healthcare community is Intuitive Surgical (ISRG).

Basically, ISRG is a company that focuses on medical devices, specifically on minimally invasive robotic systems that perform surgeries. Its flagship platform is called the “Da Vinci” system.

To date, it has installed roughly 6,700, with revenue climbing by 12% annually over the past decade.

Since the launch of the da Vinci platform, ISRG has expanded at quite a rapid pace. Its revenue climbed from $1.8 billion in 2011 to $5.7 billion in 2021.

In terms of expanding its services, ISRG recently announced a new platform called Ion. This is a lung biopsy robot, which is projected to become yet another remarkable revenue stream for the company.

The more da Vinci units ISRG ships out, the stronger its competitive edge becomes.

Aside from raking in profits from their surgical robotic units, which typically cost roughly $500,000 to $2.5 million depending on the complexity of the machine, the da Vinci units require a considerable time investment to master its operation.

This leads to high switching expenses, which all but guarantees retained and returning clients for ISRG’s business.

To put this into context, system revenue for ISRG was recorded at $1.7 billion in 2021. This indicates that about 70% of its $5.7 billion total revenue came from recurring products and services.

Thus far, ISRG has been the dominant leader in this cutting-edge space in healthcare and has shown incredible growth since its IPO. More importantly, the company has an impressive cash flow and cash balance.

Moreover, ISRG is an industry leader. As with every company in this position, ISRG has captured the lion’s share of the market.

At this point, the company currently controls 80% of the market and is expected to increase this dominance as it continues to make headway.

Considering the massive potential of this market, it comes as no surprise that more and more companies are working to topple ISRG.

Other companies have already started introducing their own specialized robots.

Medtronic (MDT) launched a spine and brain robot, Stryker (SYK) created one for knee and hip replacement, and Zimmer Biomet (ZBH) introduced a competitor in the spine and knee procedures space. Even Johnson & Johnson (JNJ) entered the fray with its lung biopsy robot.

Overall, ISRG is a brilliant company.

It possesses technological superiority over its rivals and a virtual monopoly of a rapidly growing market. These factors make ISRG an excellent long-term healthcare stock to buy and forget.

November 18, 2021

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
November 18, 2021
Fiat Lux

Featured Trade:

(A GROSSLY OVERLOOKED REOPENING PLAYER)
(ISRG), (JNJ), (SYK), (BDT), (MDT)

A Grossly Overlooked Reopening Player

Biotech Letter

Some people say that the entirety of November can be considered the Halloween season for investors, especially with the current stock market climate.

Stock valuations are higher than ever, while inflation has started to rear its ugly head since the month began.

Personally, I don’t believe that investors should be scared.

Throughout history, there has always been a bogeyman or two emerging as a reason to veer far away from the stock market. More often than not, though, these frightening situations tend to be overblown.

One of the companies that investors are afraid to risk their money on is Intuitive Surgical (ISRG).

However, Intuitive Surgical has the markings to realistically expand to 10X or even more over the following decades.

If anything, I think this is a stock that investors should be more frightened to pass up rather than to buy.

Admittedly, Intuitive Surgical’s high-tech robotic surgical platforms do look sort of scary. Nonetheless, the stock tells a completely different story.

Intuitive Surgical is a pioneer in robotic surgery, with the company’s work dating back to the late 1990s.

To date, it has over 6,500 of its systems installed across the globe and more than 9.7 million procedures performed utilizing its robotic platforms.

Basically, Intuitive Surgical offers a robotic-assisted surgery structure called the “da Vinci System.”

Surgeons use this in an effort to lessen the invasiveness of surgeries. The company’s robotic systems have been used in various surgery types like gallbladder, hernia, gynecological, colorectal, and bariatric.

While the da Vinci System has become synonymous with Intuitive Surgical, what most people don’t know is that the company gets the majority of its revenue from recurring orders of accessories, instruments, and service.

In fact, these comprise 69% of the company’s revenue in the first 6 months of 2020, with the number rising to 72% during the same period in 2021.

After all, hospitals invest millions in buying the machines and training the surgeons, so it makes sense that they want to keep them in tiptop shape.

Although these numbers look impressive, the truth is that Intuitive Surgical is barely scratching the surface of this opportunity.

Given its history and growth trajectory, the company projects that it will perform approximately 6 million procedures annually based only on its systems with regulatory clearances. In comparison, Intuitive Surgical recorded 1.2 million procedures in 2020.

Intuitive Surgical still believes that it can surpass this projected five times growth opportunity despite this promising outlook.

In recent years, the company has been investing heavily in its R&D sector to expand its reach.

One of the potential markets in its sights is the soft-tissue surgery segment, which has recorded roughly 20 million procedures every year.

And these are all based on the current population. If we factor in the aging demographics, then we can definitely expect to drive the volume higher in the coming decades.

Considering the massive potential of this market, it comes as no surprise that Intuitive Surgical faces more and more competition.

Although several big and small companies have tried to enter the robotic surgical systems segment, none can compare to the proven track record of Intuitive Surgical.

Given the 20-year headstart of Intuitive Surgical, saying that it would be difficult to catch up to its accomplishments is an understatement.

Moreover, the company controls roughly 80% of the surgical robotics market globally—and that’s a multi-billion dollar market.

Some of the companies trying to penetrate the space are Johnson & Johnson (JNJ) , Stryker Corporation (SYK), Becton, Dickinson, and Company (BDX) and Medtronic (MDT).

Intuitive Surgical has a proven track record of being one of the most notable regardless of industry, even in terms of profitability.

If you compare its bottom line, net profit margin, to its competitors, the company’s margin looks so much better than the combined margin of SYK, BDX, and MDT.

Bear in mind that the medical technology sector is one of the areas that will tremendously benefit from the reopening.

While it’s not top of mind, many elective surgeries and diagnoses were sidelined during the lockdowns.

The influx of COVID-19 cases in hospitals caused many doctors to delay these procedures, and patients didn’t want to risk infection either. This resulted in a colossal backlog of elective surgeries.

With the vaccination rates going up and the pandemic getting handled more efficiently, these very same patients will need to get treatment for the postponed surgeries.

Needless to say, this will trigger a post-pandemic boom in the elective surgeries and diagnostics field—and Intuitive Surgical will be there, ready and waiting to reap the rewards.

Overall, Intuitive Surgical is a safe pick with impressive growth potential.

Other than the immediate benefits from the post-COVID-19 era, the company has a remarkable expansion rate and innovative technology.

It’s good to be reminded though, that best-in-breed stocks don’t go on sale as frequently. The truth is, Intuitive Surgical isn’t for bargain hunters.

However, it’s a successful company that’s worth adding, especially on the dip and holding for long-term investors.

July 20, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 20, 2021
Fiat Lux

FEATURED TRADE:

(A SNAPSHOT ON HOW TO LIVE A BETTER LIFE)
(DXCM), (CVS), (WBA), (RAD), (MDT), (ABBT), (SENS),
(TDOC), (AMWL), (AMZN), (AAPL), (GOOGL), (GRMN)

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