Reference in this week's Barron's interview with hedge fund manager.
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Q: Which themes have driven your performance?
A: One is laser surgery to correct myopia. Our holdings in this group are VISX, a maker of lasers, and two facilities where procedures are done, the Laser Center and Laser Vision Centers. Each eye that's treated is one procedure. From 100,000 in 1996, the number of operations rose to 450,000 last year and is expected to hit 900,000 in 1999. We foresee 40%-50% growth next year, to 1.3-1.4 million. Even that number is a very small percentage of the potential market for this operation.
Q: This group recently was clobbered. Are you still in it?
A: Yes. We were long-term in them in mid-May. On a technical basis, which I'll come to later, the stocks then were substantially overbought. Rather than sell out, we hedged our positions by selling call options against them and going short against the box.
Q: Why didn't you just sell the stocks?
A: We could have, but our philosophy is to hold for long periods of time. We don't want to realize capital gains unless we absolutely have to.
Q: Have you gone net long again?
A: Yes. Very recently, the stocks came under enormous pressure on concerns that apparent price competition would spread nationwide. We believe the price cuts are localized and temporary, so we took off our hedges.
The going price for this surgery is expensive, roughly $2,200-$2,500 per eye, and this expense is strictly out-ofpocket. It isn't reimbursable. Many people have been surprised that the price per procedure has stayed as firm as it has over the years. When we first looked at laser eye surgery back in 1992, when it was in clinical trials, patients were paying the same as they do today. |
