Forget about GM stock; take a look into Intuitive
Dear Mr. Berko:
Please give me your thoughts on buying GM when it goes public. When will that happen and at what price? There seems to be a lot of demand for the new shares, so do you think the stock might rocket to a premium from its offering price? It sounds very exciting to me. And I’d like to know how you feel about Intuitive Surgical. I had prostate surgery several months ago with the company’s robotic machine, and I was out of the hospital the following day, as good as new. When my brother had the same surgery 10 years ago, it took him nearly six weeks to recover.
H.R., Aurora, Ill.
Dear H.R.:
I don’t know the date that General Motors Co. will go public nor the price. But the unions, government and banks want it to happen ASAP, if not sooner, in case the market continues to weaken. The government wants its $52 billion in TARP money, the unions want to turn their GM IOUs into cash, and the banks want the loans off their books.
GM supposedly made $865 million in the first quarter of 2010 and $1.3 billion in the second quarter. But I’m convinced that those numbers are fuzzy math to euchre the public’s participation in the initial public offering.
Truth has never been a sacrament in the auto industry nor on Wall Street. And I wouldn’t put it past the underwriters to play ping-pong with GM’s balance sheet and income statement. These banksters are so cunning that you could pin a tail on them and they’d be called weasels.
There’s a lot of pressure to get this deal done. And when it’s done, the government’s 61 percent ownership of GM will drop to 45 percent, which means there will still be millions of shares hanging like low fruit that won’t be picked.
However, be mindful that GM’s profits for the first two quarters of 2010 were largely the result of the administration’s costly Cash for Clunkers program. GM might eke out a profit in the third quarter, but the fourth quarter may be a black hole. I think the most common elements in the universe are hydrogen and stupidity, and there’s too much of the latter. I can’t image a good reason to own GM.
Intuitive Surgical Inc. (ISRG-$272.56) designs, makes and sells the da Vinci Surgical System. Using a three-dimensional camera, tiny scalpels and needles attached to a robotic arm, surgeons can remove tumors, perform heart repairs, remove brain tissues and disconnect and connect body parts. And it’s all accomplished via puncture incisions smaller than a dime.
The da Vinci system allows the surgeon to work more efficiently, eliminates significant blood loss, requires almost zero closure stitching, produces superior outcomes, significantly lessens trauma and reduces the length of the patient’s hospital stay. Best of all, it saves big bucks.
Revenues of this $1.1 billion company are expected to expand by 25 percent in 2010, and earnings should rise to $8.80 per share from 2009’s $6. In 2011, the Street believes per-share earnings could top $10.40 on a similar increase in sales. ISRG has no debt, and net profit margins exceed 22 percent. The company has no serious competitors, paving the road for healthy revenue growth for the foreseeable future. But I’m not comfortable owning ISRG at $272 a share. Wait for a market pullback before you buy.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. ©2010 Creators.com
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