Dear Mr. Berko:
Please give me your thoughts on buying GM when it comes public this year. When is it coming public and at what price? There seems to be a lot of demand for the new shares, so do you think it might rocket to a premium from its offering price? It sounds very exciting to me. And I’d like to know how you feel about Intuitive Surgical. I had prostate surgery several months ago with their robotic machine, and I was out of the hospital the following day good as new. When my brother had the surgery 10 years ago, it took him nearly six weeks to recover.
H.R., Aurora, Ill.
Dear H.R.:
I don’t know the date that GM comes public nor the price. But hell’s bells, the unions, government and banks want GM to come public ASAP, if not sooner, in case the market weakens. The government wants its $52 billion in TARP money, the unions want to turn their GM IOUs into cash and the banks want the loans off its books.
GM “supposedly” made $865 million in its first quarter and $1.3 billion in the second quarter of 2010. But I’m convinced that those numbers are fuzzy math to euchre the public’s participation in the IPO.
Truth has never been a sacrament in the auto industry nor on Wall Street. And I wouldn’t put it past the underwriters — JPMorgan, Bank of America, Goldman Sachs and Citigroup (the same Wall Street banks that crippled Main Street) — to play pingpong with GM’s balance sheet and income statement. These banksters are so cunning that you could pin a tail on them and they’d be called weasels.
There’s a lot of pressure to get this deal done. And when the deal’s done, the government’s 61 percent ownership of GM will drop to 45 percent which means there will still be millions of shares hanging like low fruit that won’t be picked.
However, be mindful that GM’s profits for the first two quarters of 2010 were largely the result of the administration’s costly Cash for Clunkers program. And while GM might eke profit in the third quarter, my gut suggests that the fourth quarter may be a black hole. I think the most common elements in the universe are hydrogen and stupidity, and there’s too much of the latter. I can’t imagine a good reason to own GM.
Intuitive Surgical (ISRG-$272.70) designs, makes and sells the da Vinci surgical systems used by physicians who specialize in head, neck, cardiothoracic, urologic, gynecologic and general surgeries.
Using a 3-D camera, tiny scalpels and needles attached to a robotic arm, surgeons can remove tumors, perform heart repairs, remove brain tissues and disconnect and connect body parts. It translates the surgeon’s natural hand movements on instrument controls into corresponding micro-movements inside the patient’s body. And it’s all accomplished via puncture incisions smaller than a dime.
The da Vinci system allows the surgeon to work more efficiently, eliminates significant blood loss, requires almost zero closure stitching, produces superior outcomes, significantly lessens trauma and reduces the length of the patient’s hospital stay. And best of all, it saves big bucks.
Revenues of this $1.1 billion company are expected to expand by 25 percent in 2010, and earnings should rise to $8.80 from 2009’s $6. In 2011, the Street believes earnings could top $10.40 on a similar increase in sales. ISRG has no debt and net profit margins exceed 22 percent. There are no serious competitors paving the road for healthy revenue growth for the foreseeable future. But I’m not comfortable owning ISRG at $272 a share. Wait for a market pullback before you buy.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com.
© 2010 Creators Syndicate Inc.
