Boston Scientific

Boston Scientific announced yesterday that it’s halting sales of its implantable cardioverter defibrillators (ICDs). The suspension was due to filing errors and not safety issues, but the company says it still has no idea how long the suspension will last. For a firm fighting to recover back to former glory, this is another setback.

Yet, the stock’s price chart suggests that bottom feeding might not be a bad idea one of these weeks. The news is bad, true, but the news around cheap stocks usually is bad. I watched the stock fall from $45 in 2004, patiently waited for some kind of base to show up, then built a position in 2007 and 2008 at a cost basis of $12.98. Boy, did that look cheap.

It closed yesterday at $6.80.

The stock chart will show you a price line descending at a 45-degree angle for the past five years or so. Notice, however, that even during the financial crisis, the shares bottomed in the $6-7 price band in the November 2008 to March 2009 time frame. Guess from where they bottomed before launching their 42-month 600% shot higher in November 2000? The $6-7 price band. Look where they are again now: the $6-7 price band.

Everybody hates the company, and the stock. The last time I saw people hating it this much was…autumn of 2000. I know there are challenges, yesterday’s headline couldn’t make that clearer, but the company’s new CEO, Ray Elliott, did a good job at Zimmer.

Very good, actually. During his time at Zimmer’s helm, the company’s sales and market capitalization quadrupled. Sales increased from about $1 billion in 1997 to about $4 billion in 2007. He helped take Zimmer public in 2001, with an initial market capitalization of some $5 billion. When he left the firm in 2007, its market capitalization was more than $20 billion. In 2005 he was named “Best CEO in America” for Health Care (Medical Supplies and Devices), by Institutional Investor magazine. He’s no slouch, and he’s the guy in charge of getting Boston back on track.

He bought 100,000 shares of BSX last August for $11 each. Few people felt the pain of yesterday’s news worse than he did. Has he succeeded yet? Not by a long shot. Better news is probably a couple or more quarters away. Still, those bad quarters are looking pretty well accounted for in the stock price these days, and the current price range has proven to be a profitable entry point in the past.

Disclosure: own BSX at $12.98

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • The Kelly Letter
    A Complete Investment Management System
    The Kelly Letter  every Sunday morning by email.
    Like no other. Many subscribers say this is the best read of their week, astonishing in its ability to distill seven days of noise into one succinct overview of the very few items that might matter. Start your Sundays right!
    A one-page Quick Start Guide
    with page number references to full information in The 3% Signal. You'll receive access to this right away so you can begin transforming your portfolio into a performance machine immediately.
    The 3Sig Calculator.
    A thing of beauty! You'll use it to generate your own personal signals every quarter including exact share amounts to buy and sell based on your account balances. It emails you the results to make later quarters easy by keeping last quarter's numbers at your fingertips. Some subscribers say this tool alone justifies their subscription price.
    The subscriber-only section of this website
    where likeminded investors are commenting on notes and discussing in forums. Jason joins these interactions every day. They're a treasure trove of investing tips and wisdom.
    The archive of Kelly Letter notes.
    It’s a research center, searchable and smartly tagged to make gathering time-stamped material on covered subjects easy.
    The subscriber podcast.
    Jason reads every letter word-for-word. This feature was requested by subscribers who prefer audio learning. They listen on their Monday morning commute, during a workout, or while reading along at their computer.



    $200/year
    Save 17%



    $20/month
    Pay as you go
    Or sign up to receive free email and learn more about the system.
    Do you have a question?
Bestselling Financial Author