Yesterday we took a look at the bullish SYK breakout and the bullish chart of the Medical Device iShares (IHI). So here is the thing; bullish stocks are one thing and sound business is another. Many of these device/equipment companies have long-standing and sound businesses.
But yet another thing is valuation. In combing through IHI’s holdings today, looking at charts, business specifics and P/E & P/S I am struck by how over valued and over played the sector is by the suits, who evidently have read my many assertions that the sector is stable during economic soft patches. Just kidding, but… Wall Street loves themselves some medical device companies these days. IHI’s holdings…
As just one example, here is Inogen (INGN), ass launching 23% higher on an earnings beat and good forward projections.
Okay fine, but this company makes friggin’ Oxygen Concentrators, which by my now slightly dated experience is one of the most saturated and competitive areas in Healthcare. In short, these are the valve assemblies that go with those portable oxygen tanks you see people wheeling around on occasion. We used to make the manifolds for these things and Sunrise Medical (formerly Devilbiss) was basically at war with us on the component price because they were at war with the market and its pricing pressures from Medicare. I eventually said “no mas!” and moved on.
So maybe I am dated or just maybe Wall Street is pumping another segment the way they did another area I had real world experience with… 3D Printing. See, from February 2014:
That stuff still has not come back from the financial media promotion and it is not going to either.
In looking through these Medical Device stocks I also saw a maker of Patient Monitoring Equipment selling at a nose bleed valuation. Can’t remember which company it was. Patient Monitoring was probably the largest segment my company participated in. And while not as down and dirty as portable oxygen, it is old technology and subject to much competition.
Anyway, back on our fine Oxygen Concentrater guy above, INGN; check out the valuations for this ‘technology’ (from Yahoo Finance).