Wednesday, February 24, 2010

The Battle of the Best

I am part way through converting my growth portfolio from bargains to quality. Out went British Airways and CSR and in came Google. The timing of the Google purchase was not good as they have since declined over 10% but when you are buying to keep for the next ten years that does not matter so much.

Next step is to ditch Dana Petroleum and some remains of British Banks to buy into an American Beauty.

There are four possibilities. They all have fantastic global growth prospects, high to outrageous returns on invested capital and more cash than they know what to do with. Let's line them up:

1. Apple

Everyone knows how well Apple has been doing in the last five years or so. The question is can it maintain the momentum. If so then the current forward PE of under 20 is not expensive.

2. Amazon

Amazon is perhaps the most successful of the dot com boom companies. One recent survey had it as the 43rd biggest global brand which is quite something for a pure website. Recent financial reports have had analysts drooling into their coffee but the forward PE of 30 is not cheap.

3. Oracle

I have spoken about Oracle before. With increasing margins, share buybacks, dividends and a strong competitive position it is the sort of company Warren Buffet would love if he understood technology. Perhaps the safest choice of the four.

4. Intuitive Surgical

ISRG is the joker in the pack. It will never make the top 100 brands but as long as it stays number one in the field of robotic surgery its future is extremely bright. The fact that every robot sold leads to a long stream of earnings from the disposable operation equipment gives it wonderful financial prospects. With a forward PE of over 30 and 2009 sales of "only" $1 Billion ISRG is the one that could become a "10 - bagger" in the next twenty years or so.

I will post on each company separately in the near future.

Let the battle begin!

1 Comments:

At 9:33 am, Blogger mewmewmew said...

ISRG is the global leader in robot surgery. Once a hospital has invested in the system and the associated staff training it would be financially painful to then change to a competing product. This gives ISRG a very strong position.


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