If you’re not afraid to swim with sharks, consider the volatile Mako Surgical (MAKO) as a speculative medical device play.
The company’s gut-wrenching fall from above $40 in early 2012 to just $12 or so now is fairly well known — and considering the fall from grace came as MAKO was picked by Motley Fool founder David Gardner as one of our Best Stocks for 2012… well, readers should be fully aware of the risks and how quickly this company’s fortunes can go south.
But despite a brutal quarterly earnings report last year that prompted a one-day drop of almost 40%, and despite a current lack of profitability, there is speculative potential here for Mako. The company makes expensive robotic surgery equipment that can reduce the risk of complications for patients and reduce the length of stay at a facility — a win-win for hospitals. The potential in this kind of innovative medical device is evident in Intuitive Surgical (ISRG), the $20 billion robotic surgery company behind the DaVinci system that has taken hospitals by storm. ISRG stock is up over 2,800% in the last 10 years.
Clearly, you have to be patient … and you have to hope that the capital spending environment improves at hospitals. After all, Mako gear doesn’t come cheap, and cash-strapped hospitals reeling under Obamacare paperwork don’t have the time or inclination to just throw money at gadgets for the OR.
Then, of course, there are the recent concerns about whether robotic surgeries are actually more cost-effective in some cases.
Investors should fully understand, too, that one FDA complaint or regulatory overhaul could cause MAKO to dry up in a hurry. And with operations failing to turn a profit right now, the status quo is not enough to make this play a winner.
But the brutal selloff of the past year coupled with the demographic shift that will send more Baby Boomers to hospitals in the next few years could stack up big-time in favor of MAKO. Healthcare is a recession-proof sector with big growth ahead, and an innovator like Mako Surgical could clean up if the chips fall right.