Stocks moving up on a bad day- CVTX, BSX, and ISRG

As I surveyed the carnage from last week’s market drop, I tried to focus on those stocks that actually moved up. There are several reasons I did this: 1) so as not to get too depressed 2) To see what stocks have very positive market sentiment and 3) to get a feel for where things will go over the near term. Only a very few stocks I follow managed to trade up. Of these, the most interesting to me are CVTX, BSX, and ISRG. I have written about the first two before, so I will be brief here.

Regarding CVTX, as anyone who follows the stock knows, it hasn’t exactly been a wall street darling. They make a novel anti-anginal drug, Ranexa, which has worked very well in many of my patients and have an interesting pipeline. The sales of Ranexa continue to grow too slowly to satisfy the street, and the stock has been getting punished. Why then was the stock up the last three trading days- popping off its recent low of 9 to now trade as high as 9.80 in the middle of the day Friday. It closed Friday at 9.63 ( a respectable 6% gain over the past three days.) The company has released no news over this period. My guess though is that the stock is trading up on upcoming diabetes data for Ranexa- which will be released in two weeks at the AHA. A reader posted that he had heard from his rep that the data was very good. The might be worth a play in the November options market.

BSX was also up strongly on Friday. They announced layoffs and beat very low expectations- primarily on growth of their rhythm management division (the old GDT). To me, this surge represents a great opportunity to short the stock. The company is still losing money, and things will get much worse over the next few quarters. The drug eluting stent market continues to shrink, now prices are starting to fall (as JNJ stated in their conference call) and a third entrance into the market is coming very soon. The Endeavor- which is now the number one stent in Europe- will soon be introduced here. The FDA panel just unanimously voted for its approval. The ICD market was just starting to recovery, but should take another big hit after the last recall (this one by MDT, but it will hurt all three companies.) The third company is Intuitive Surgical or ISRG. The makers of the Da vinci device, a robotic surgical device which is quite cool. Their robots can move in multiple planes almost like a human. There stock has had an almost google like trajectory over the past few years. I looked at the company seriously about three years ago. At that time, I went to a minimally invasive cardiac surgery conference with one of the surgeons I work with. I had the opportunity to talk to a number of surgeons who were using these robotic techniques. The general impression I got was that surgeons- even those who are comfortable with these machines still prefer old fashioned surgery with larger fields of view and the ability to use their hands. To them, the robotic surgery movement, was primarily a fad driven by marketing. Patients were more likely to see surgeons if they used the robots. The sales of the Da Vinci have continued to grow- and sales are great, but I still haven’t met a surgeon who prefers it. It certainly make me wonder if the sales can continue to grow. The PE is over 100, so any slow down would be a real problem for this stock. I am uncertain if the device is more helpful in other fields where it is used that in CV surgery. It is also possible that younger surgeons who started their training on this device, as more comfortable with it. I would love to hear from anyone who has personal experience with the device. For now I am staying away from the stock. I wouldn’t short it though. Too much momentum for that.