Keep on Believing in CMG and ISRG
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Bearish investment articles are often a great place to start when looking for bullish stock recommendations. I recently read an article titled "3 Stock Stars of 2011 That Should Be Avoided In 2012" that makes bearish calls on Intuitive Surgical (Nasdaq: ISRG) and Chipotle Mexican Grill (NYSE: CMG). The reason I chose to highlight these two stocks instead of the third (CommVault Systems (Nasdaq: CVLT)) is that they are two of my larger personal portfolio holdings. While many investors might be shaking in their little space boots after reading a bearish article on two of their stocks, I am ironically optimistic.
"What goes up must come down" is the basic thesis of the article that is bearish on ISRG and CMG (see the first paragraph). In contrast, the basic thesis of my article is, "What goes up may keep going up." One of the best ways to find winning stocks is to locate companies with strong past price appreciation. For fellow Fools reading this article, you may have already noticed that I have hit on two of David Gardner's criteria for great growth companies: 1) Strong past price appreciation and 2) Believed to be overvalued by at least one media source.
Past price appreciation is one of the most important attributes of a great investment. Every bullish investor wants to find the next great stock such as Apple or Microsoft. Since their IPOs, both companies have rewarded investors with returns on investment of over 1,000%. Before Apple and Microsoft rose in value by 1,000%, each company’s share price increased by 100%, 200%, 300%...999%. In other words, in order for Japanese eating champion Kobayashi to eat 50 hot dogs in 12 minutes, he has to eat 20 hot dogs first and then keeping going. The bearish investment article cites year to date (YTD) performances of over 78% and 60% in 2011 for ISRG and CMG, respectively, as reasons for their downfall in 2012. If anything, I believe that the strong past price appreciation from these stocks amidst a poor economy signals their superior strength.
Like Apple and Microsoft, ISRG and CMG have great products. Intuitive Surgical’s DaVinci robot has revolutionized the medical world by initiating the shift from surgical procedures performed by the human hand to surgeries performed by more efficient robotic arms. Chipotle has created a cult like following (including myself!) for its delicious burritos that continues to grow. Despite this lackluster economy, both ISRG and CMG have boosted incredible revenue and earnings growth while also maintain strong profit margins:
|
|
Chipotle Mexican Grill |
Intuitive Surgical |
|
Earnings Growth % Change (TTM) |
24.42% |
37.74% |
|
Revenue Growth % Change (TTM) |
23.8% |
22.5% |
|
Operating Margin (TTM) |
15.64% |
39.34% |
All statistics from Fidelity.com
Intuitive Surgical and Chipotle have continued to reward shareholders handsomely in a stock market that has been less than kind. I remain bullish on these great companies and expect them to continue posting great returns.
Michael Caligiuri-de Jesus owns shares in ISRG and CMG and will not buy or sell either stock within the next 48 hours. Follow Michael on twitter @Calinvestments
