Blade Runner, Nora and Ideas From Iceland

Claus is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Blade Runner and Nora

When I think about my most recent purchase of shares in Icelandic Össur, manufacturer of prosthetics and artificial limbs (OTC: OSSUY, in Copenhagen OSSR and Iceland Nasdaq Omx-Exchange under OSSRu)  especially two things come to my mind. The first is watching the notorious sprinter Oscar Pistorius aka "Blade Runner" competing and qualifying for the Olympics as part of the South African men´s team on 400 m and 1600 meter relay. Running on specially designed prosthetics from Össur, he is the first disabled athlete actually to compete at the "normal" Olympics in London in a few days time. 

The second thing took place in much more familiar surroundings at a parking lot here in Copenhagen. The rain has just stopped and I was stashing the groceries into my car, when I saw a woman in the thirties coming towards me with a little girl. Her smile was radiant and her flashy white hair nearly competing with the sun that tried to show up behind the drowsy Scandinavian summer-skies. I simply could´t believe it. Nora! Last time I saw her, she was in a wheelchair due to a devastating accident some years ago, in which the heroic efforts of the paramedics saved her life, but was not able to save her right leg from knee and down. I had to know why and how come this high school teacher and mother of a 9 year old girl was able to walk, as if that horrible day two years ago never happened. She smiled and showed me her prosthetic from Össur, an artificial limb attached from the knee that through advanced software gave her a nearly perfect walk. She told me how this limb actually adjusted to the individual user in order to imitate a normal walking pattern and how bionics made the knee and foot bend as a normal limb giving a natural posture. When she had finished her explanation and before we parted I also had to hear some news from her little daughter, and I gained some important insight into the life of a 9 year old girl. She proudly showed me how she had learned to set up her calendar in her new iPhone from Apple. When I asked how school was, she told me with a clever and try-to-be-mature tone that only a 9 year old girl can show up that it was not that hard to be in school at time - "´cause every time I wake up my Mother is smiling. My Dad an me thinks it´s just like old times. See Claus - she continued- now she does it again!". I looked at the woman and saw how right her daughter was. I still think about what I saw in her calendar: Tuesdays and Fridays at 5 pm: "Jogging two miles with Mom"!

Icelandic stamina

3 days later after having looked into Össur I bought my first shares in the company. Looking at the company from Foolish criterias it shows up some staggering numbers for a relatively small and unknown company. With sales in 2011 increasing 30% to around 90 million $ from the year before and an EBITDA on 75,6 $ the company also an historical p/e on 18. Though one could argue that this is relatively high, nothing seem to point to fact that the need for bionics and artificial prosthetics will fall. The only real threat is government cutbacks and insurance policies resulting in people having to choose cheaper and less advanced products from other manufacturers. But where a close competitor like Danish Ambu (AMBU-B in Copenhagen) have had an increase in sales around 5-8% since 2006 Össur have had an increase in sales on roughly 30% on a yearly basis in the same period. The bottom line and net result was 36.6 million $ in 2011 as compared to 34,5 million $ the year before.

One major drawback for many, however, is that this company currently trades with most volume on the Copenhagen Stock Exchange. For those not having access to that, major competitors  like Hanger (NYSE: HGR) or the Dutch Orthofix International (NASDAQ: OFIX) might be a choice. Orthofix numbers, however showing market cap on 760 $, might signal some clear warning signs for its future. Hanger, however, shows up a stellar performance and it is worth digging in through this article.

It remains to be see, whether these two players can really show up to Össurs more advanced products. Or if there will be room enough for all, since Össur´s real drawback is the costs of their products. (In Scandinavia, looking at other fields of therapeutic facilities, such as wheelchairs, lifts, walking aids, outdoor scooters etc., the companies seemed to have agreed to sell different aids to different segments of the potential consumergroup. A light wheelchair made in aluminium or carbon for an active, young consumer can easily amount to 8000$ in Scandinavia, whereas a wheelchair used for transportation in airports or hospital cost far less. And with electric wheelchair far more expensive than both.)

Whatever the future might bring, Össur survived in a country that went bankrupt (remember!?) some years ago, the 40 year old company still keeps up to its slogan "Life without limitations", and keep delivering highly advanced products to people who are not hindered by a disability, but want to remain active. To survive as a company in that harsh a business climate shows stamina. By relentlessly pushing forwards the company is with no doubt a Top dog in their field. By going beyond making normal old-fashioned prosthetics and into the field of bionic prosthetics,  they are in a way showing up as Rule Breaker as well, compared to other companies trying to nap a piece of a steadily growing market share. With constantly improved products in the pipeline and 1600 employees world wide, including the States, the company have seemed to be relatively immune to competition. As of lately the Danish investing group William Demant (Copenhagen WDI) showed interest to increase their stock portfolio with Össur shares from around 39% to around 45% underlining no wish to take over the company or take it of the exchange. However, if this maneuver will succeed remains to be seen.

Essence of long-term investing ideas

Making highly advanced prosthetics not only change the life for the better thousands of people. It does the same for all those related to this group. At the same time it saves government related costs  due to the fact that people in need for these prosthetics will be able to function nearly at the same level as before the injury, including keeping up a normal job.

When all comes down to it, isn´t that what buy and hold really is about: Somewhere someone gets a terrific idea to change things for a lot of people. And by lending this company money by buying stocks you both get the chance to make it realize the idea, become part of the success and reap a substantial profit yourself. Like other Fools I am humbly on an eternal quest for the Great Multibaggers, and sometimes that leads me to get too obsessed with key stats and figures. Though they are important, stocks are more than numbers. In Ossurs case it is about a woman gaining back her confidence in life and a little daughter getting back her Mom.

Claus Torp, Copenhagen. I own shares in Össur and intend to hold them for a long time. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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