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Stryker Corp.: Value, Growth, & Safety

March 25, 2009 | About:
Ryan Vanzo

Ryan Vanzo

1 followers
People always bother themselves with questions like “Should I invest in growth companies or value companies,” or “Should I flee to safety or stay the course?” My answer is simple: Find a stock that gives you all of the above, and Stryker (SYK) fits the mold.

Safety

Perhaps the greatest thing about Stryker is it's resistance to downturns. Stryker's main products (orthopedic implants and medical equipment) are fairly resistant because hospitals cut their budgets much slower than other industries. Even though many orthopedic implants such as hip replacements are optional, the aging population should keep demand strong. As to lower cost competitors such as those in Asia, I don't think it's a problem. When it comes to buying clothes, it doesn't really matter where it's produced. But when getting a hip replacement, I will be sure to get the best available, not the cheapest.

Growth

With almost 40% of the companies stock owned by insiders, management has a strong incentive to produce healthy results. For many years, including recessions, Stryker has been able to produce 20+% revenue increases. Although that number last year fell to the teens, thats a rare thing in todays market. Not only has Stryker been able to produce outstanding historical results, they should be able to do well in the future, even if they didn't try. Stryker has one of the greatest forces behind them, demographics. AN aging population will fuel Strykers growth for years to come. Any form of government subsidized healthcare will only boost demand for their products. Stryker should not only be able to produce organically, but has recently been in merger/buyout rumors with Johnson & Johnson (JNJ) and Baxter International (BAX). My dream merger deal: Stryker and Intuitive Surgical (ISRG).

Value

Having one of the greatest balance sheets in the entire healthcare industry has its advantages. Sitting on $2.2 billion dollars in cash gives them the mobility to expand efficiently in a downturn without worrying about credit problems. As for debt, Stryker carries a paltry 21 million in debt, most of which isn't due for many years. With a P/E of 12 being outrageously lower than historical valuations, Stryker is awfully compelling, especially since their business is looking to grow again this year (conservative forward P/E of 10). A strong and growing dividend of $0.40 (1.2%) isn't bad either.

Overall, this stock provides the safety so many desperately seek, the value only available in a bear market, and the growth thought to only be available in a bull market.

Disclosure: Long SYK

Ryan Vanzo

About the author:

Ryan Vanzo
Ryan Vanzo has been working in the financial sector for over six years and has expertise in both the stock market and the economy. Specializing in deep-value investing, Ryan Vanzo has been able to navigate turbulent and calm markets alike.

Rating: 3.5/5 (15 votes)

Comments

Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
Stryker is an outstanding company at its lowest valuation in a couple of decades.

This is a great time to buy SYK.
guruek
Guruek - 5 years ago


If you want to use other symbols, just change "msft" to the corresponding symbols.
scubasteve10
Scubasteve10 - 5 years ago
You might want to take a look at how the executives at Stryker allocate some of shareholders' capital.

http://dealbook.blogs.nytimes.com/2009/03/27/a-trip-to-the-doctors-on-the-company-jet/

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A TRIP TO THE DOCTOR'S ON THE COMPANY JET

What does it say about the local medical community when the chief executive of a large medical technology company has to hop on the corporate jet and fly to another city to get an annual physical? That’s the situation at Stryker, based in Kalamazoo, Mich., which disclosed in its proxy that Stephen P. MacMillan, its chief executive and president, “traveled to a physical exam on the company aircraft.”

While the company didn’t disclose where Mr. MacMillan flew to for the exam or give a breakdown of either the cost of the flight or the exam, this was the second consecutive year that the executive flew out of town for a physical. That’s got to lead to some awkward moments at the Kalamazoo Country Club, another company-provided perk that Mr. MacMillan receives, when he runs into local doctors in the clubhouse.

Indeed, while the proxy statement notes that Stryker “believes that its perquisites practices are conservative,” the filing shows that top executives at the company got a wide range of perks last year.

Among them was an off-site planning meeting that spouses of several executives were allowed to attend. The cost of attendance for one Stryker executive, Andrew Fox-Smith, the president of the company’s international group, and his wife was $36,985, which seems like a pretty plush trip.

Granted, Mr. Fox-Smith is based in Hong Kong, so they had a long way to travel. As it happens, Stryker also pays for his housing and utilities, which cost $185,165 last year.

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yswolinsky
Yswolinsky - 4 years ago


"If you want to use other symbols, just change "msft" to the corresponding symbols."

How/where can we do this?

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