Why I Bought Intuitive Surgical (Nasdaq: ISRG) I have never been much of a healthcare investor. I always felt that there are folks in lab coats or donning stethoscopes that had a much better advantage at I than figuring out if a red hot biotech would ace phase three clinical trials or if a drug recall would be seriously detrimental. It certainly doesn't help that I was perhaps that one guy who actually lost money on Amgen (Nasdaq: AMGN). Yet back when I was a Graduate Assistant at the University of Miami, working towards my MBA, one of the professors I was working for had a passion for telemedicine. He would send me off to retrieve any and all trade periodicals that contained stories about the nascent technology -- and the pickings were slim but everything I read sounded excited. Could a patient really be consulted, remotely? Could treatments and procedures be administered while the medical professional was miles -- if not time zones -- away? It seemed like science fiction at the time. It's a reality today thanks to Intuitive Surgical. The company's Da Vinci machine is a star surgeon. Following a human surgical's instruction it is able to operate on a patient not only while the surgeon is elsewhere but also more efficiently given its precision and instilled ability to correct human error. There are more than 300 Da Vinci machines installed in hospitals all over the country. What really is the investing gravy here is that the parts, supplies and programming that need to be replaced after a series of surgeries can only be bought through Intuitive Surgical. In other words, the company's making decent money on the razor and even more on the blades. Whenever I read about a story of the possibility of robotic surgeons going on to a battlefield in times of war to tend to the wounded or of elaborate procedures being done in faraway places with no qualified surgeon present I no longer shake my head. I know it can happen because Intuitive Surgical is living that fantasy in real time. The company is highly profitable and its fatter margin maintenance and supply business is growing even faster than the sale of the machines (which is a fair indicator that the machines already out there are gaining more acceptability and being used more often). I bought Intuitive Surgical early in 2005, while many out there still believe this is the stuff one would catch on the SciFi Channel rather than Discovery. Why I would sell Intuitive Surgical? This is breakthrough technology here. It's not supposed to be easy. While the Da Vinci machine has been tested and obviously 300 hospitals wouldn't have made this expensive (the machines cost roughly $1 million apiece) investment -- and continue to use the machines even more -- we all know the pitfalls of technology. Newer technology trumps the original. Bad press (if malpractice cases stack up -- which has certainly not been the case so far). A lot can happen and that's why there is always risks to buying into the potential for rewards in disruptive technologies. Buying into Intuitive Surgical is buying into a revolutionary product as well as its profit potential. So a hiccup in earnings may give me pause, but only if it looks as if it is the start of a downward trend. Go Back UNDER

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