RR: Stryker (or SYK) has been my father's best investment ever...He has had a large investment in this hometown company for a long time (10+ yrs)...Last time I checked it was still his largest holding...My father doesn't do much trading BUT he does choose wisely...Stryker is incredibly well run and my father knows the management team and his firm has done legal work for them...Sometimes it pays to invest in what you know and understand...check out this chart for consistency over time...
finance.yahoo.com
Here's a new Investor's Business Daily article on Stryker...
Helping Baby Boomers Leap Into Middle Age
BY AMY REEVES
Investor's Business Daily
Friday October 18, 10:35 am ET
When that old football injury catches up with you, you might need help from Stryker Corp.
The firm makes artificial knees, hips and spinal implants, as well as related surgical gear.
While the aging of America generally boosts demand for such things, Stryker Chief Executive John Brown says the never-say-die attitude of today's old folks lifts it even more.
"Baby boomers are much more active than their parents were," he said. "They're much more prone to the hip problems and knee problems that require surgery."
Advances in medical technology also make this type of surgery more popular. It's not just the elderly who are getting spare parts, says analyst Kate Sharadin of Gerard Klauer Mattison & Co.
"Some of the devices are suited to younger patients," she said. "The new hips and knees have longer wear rates, which makes them more attractive. The procedures are less invasive, and the recovery times are better."
Since June, Stryker has been testing gear for a new technique for knee replacement developed by Dr. Peter Bonutti. It involves suspending the patient's leg from a holder so its weight can help pull tissue away during surgery.
The procedure requires an incision about 70% shorter than usual and promises a faster recovery time and less pain. Stryker unit Howmedica Osteonics is testing a line of instrumentation to use in the surgery.
"At this point we're very excited about it," Brown said. "It's under a well controlled clinical study right now."
Profit Slowdown
Howmedica Osteonics is part of a firm Stryker bought from Pfizer Inc. in 1998 for $1.65 billion. That deal almost doubled Stryker's revenue.
But the write-offs it involved briefly derailed the firm's ongoing goal of 20% annual profit growth, which it had maintained for 25 years running. Year-over-year profit gained only 12.5% in 1998 and 1999.
Stryker unloaded the last of its Howmedica burdens in August, when it announced it was closing a manufacturing plant in Rutherford, N.J.
The decision to do so didn't come easy, Brown says.
"It was something we agonized over, but we finally concluded we were just going to have to close it," he said. "Our plants have become much more efficient. And we acquired a number of plants when we acquired Howmedica, and there was just duplication. Same technology, same manufacturing skills in more than one individual plant."
Smart Purchase
In the last two years the company has returned to financial form.
Its third-quarter profit grew 37% from the prior year to 41 cents a share. Sales rose 20% to $745.6 million.
The recovery emboldened Stryker to make another buyout this year, though a much smaller one.
In July it paid $135 million for the spinal-implant unit of Tyco International Ltd.'s Surgical Dynamics Inc. Its chief product is a line of cylinders implanted between vertebrae to keep them apart, eliminating pain.
With this purchase, Brown says, the spinal division is pretty well filled out. The firm estimates it now has 11% of the $1.3 billion global spinal-implant market.
"We feel now that we've got the full complement," he said. "We will continue to have an active and robust development program, but we don't feel we have any significant deficiencies now in our product line."
The recent buyout was in a good market for Stryker, analyst Sharadin says.
"They did not need anything in the hip and knee product categories, but they were a little bit weaker in the spine," she said. "The spine market is also one of the faster-growing markets - 15% to 18% (annual growth) vs. a little lower growth for hips and knees."
Stryker will stay on the lookout for products that make surgery less invasive, like endoscopes and microinstruments, Brown says.
He also says the firm's real growth comes from the orthopedic implants themselves, which account for more than half of sales. Stryker ranks No. 2 in that market behind Johnson & Johnson.
Stryker benefits from a general increase in prices for medical implants, Sharadin says. Patients have shown a willingness to dish out more cash for higher-quality goods.
That could change, however.
"The reimbursement has been steadily declining," Sharadin said. "We've seen proposed increases for hips and knees in 2003, but we believe that was to help hospitals capture some of the declines we've been seeing. I think there will be a little bit more resistance to the type of price increases the companies have seen over the last few years."
Still, analysts expect Stryker to meet its growth goal yet again this year. Those polled by First Call see full-year profit rising 25% to $1.67. Next year they expect a 20% jump to $2.01.
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