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The S&P 500 is in full swing proper now, having entered the third yr of a bull market. However one factor historical past exhibits is that it’s only a matter of time earlier than the inventory market crashes once more. It’s an inevitable a part of investing.
To be clear, a correction is a drop of 10% from latest highs, whereas a crash is a decline of 20% or extra. Neither is the tip of the world. Actually, the second lesson from historical past is that the market has all the time ultimately bounced again to scale new highs.
Subsequently, I’d see a crash as a good time to do a little bit of discounted procuring. And that is the one world-class S&P 500 share I’d like to purchase extra of throughout a market meltdown.
Surgical robots
I’m serious about Intuitive Surgical (NASDAQ: ISRG), the pioneer in robotic-assisted surgical procedure. Its flagship da Vinci system helps surgeons carry out minimally invasive procedures, which frequently result in sooner restoration instances and shorter hospital stays.
Final yr, 2.2m procedures have been carried out worldwide utilizing da Vinci machines. And over 15m have now been carried out over the previous 20 years.
In Q3, worldwide procedures grew roughly 18%, and the put in base grew to 9,539, a rise of 15% in contrast with Q3 2023. Income jumped 17% to $2.04bn, whereas internet earnings rocketed 36% to $565m.
Highly effective enterprise mannequin
What I like right here is that the overwhelming majority of Intuitive’s income is recurring (83% final yr). You see, each surgical procedure with the robots require particular devices and equipment that want common substitute, producing constant gross sales.
And as extra programs are put in, this creates a recurring-revenue flywheel, the place extra put in programs drive extra demand for equipment and providers. Alternative devices and equipment contributed 62% of whole income for Q3.
Plus, as soon as the agency’s merchandise are put in in hospitals and surgeons are educated on them, there are very excessive switching prices. In different phrases, extremely expert professionals comfy with the da Vinci system are unlikely to need to swap. This provides Intuitive a large aggressive benefit (or moat).
What am I ready for?
That each one sounds nice, so why anticipate a giant dip earlier than shopping for extra shares? Nicely, after surging by round 100% previously yr, the inventory could be very costly. At $513, it’s buying and selling on a price-to-earnings (P/E) ratio of 82.
Whereas the inventory isn’t ever low-cost due to the agency’s dominant aggressive place and high-quality income, that’s nonetheless very expensive. Actually, its above the five-year P/E common of 72.
Additionally, Intuitive isn’t with out danger, as shareholders came upon in the course of the pandemic when many elective operations have been postponed. Income took a success and the inventory dropped 35% in a single month in early 2020.
Subsequently, one other world pandemic is a key danger, whereas the corporate faces growing home competitors in China.
A shiny future
Nonetheless, I’d like to personal extra shares (on the proper value) for the long run. The corporate’s next-generation da Vinci 5 system provides improved 3D imaginative and prescient for higher surgical precision, and elevated computing energy and data-gathering capabilities, providing the potential for self-improvement.
Trying forward, the worldwide marketplace for robotic surgical procedure seems nowhere close to saturation level. In line with most estimates, it’s set to develop briskly at a compound annual charge of round 17% by way of to 2030.
