How We 3X Our Money With This Medical Compounder
A question came in from a reader named Jane Ng wondering if we could share some examples of winning compounders OUTSIDE of the usual tech stocks…
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Your email on finding new Alpha companies have been very interesting. I guess I didn’t realize how important this skill is until I saw you lay it out in clear terms. I totally agree that the FAANGs can’t grow forever and they will eventually hit a growth plateau. So knowing how to find new growth companies will help us stay relevant in the market for years to come…
That said, I’m wondering if you could share a few more examples of good and growing companies outside of the usual FAANG stocks.
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Sure thing.
One of the things we like to look for in a company is their ability to scale their earnings.
The easier, the better.
A good example would be the ‘sticky’ factor, where the customer continues to pay the company in order to continue using its service.
For example: Microsoft Office, Adobe Creative Cloud…
Think of it like having a printer and in order to continue using the printer, you have to continue buying and replacing the ink cartridge.
This creates a recurring income for the company.
At the end of the day, the total money spent on buying those ink cartridges is going to cost more than the printer itself.
Now if these cartridges are ‘sticky’ and ‘operation critical’, all the company needs to do is to increase the price of the cartridge by a few cents and you’ll see a jump in their recurring revenues.
Make sense?
So one of those compounders we found using the ‘Alpha’ method is a company call Intuitive Surgical…
It sells the da Vinci machine to major hospitals.
These machines allow surgeons to perform micro-surgical procedures with far better precision as they allow surgeons to have a better view of the operated area (magnified 10X of what a human eye can see).
Not only that, the machine also uses tiny instruments that moves like a human hand but with far greater range of motion, reaching the targeted areas with ease.
Long story short, it is an amazing machine that improves the success rate of the surgery.
That said, not only do the hospitals need to buy the machine, the hospitals have to pay for the instruments and accessories that’s used for every procedure, thus creating a steady and predictable recurring income for the company.
Here’s a quick look at their revenue and profit:
Intuitive Surgical is INDEED a great recurring business with a long runway for growth — both domestically and internationally.
We bought the stock at $153
And today, it is trading at $428.10.
That gives us a paper profit of 179.3% today…
We’ve almost 3X our money.
With the way the company is performing, the returns are likely going to be a lot higher in the near future…
Because the world has started to embrace AI and the future of robotic surgical procedures looks bright.
So at this point, we’ll just hold, and let it compound.
When you know how to find quality compounders… growing your portfolio becomes quite easy.
It gives you more opportunities and it may even help you uncover quality companies that grow faster than FAANGs.
When you have more options…
You have better growth opportunities…
And you’ll avoid overpaying for stocks.
Anyway, the enrollment for Alpha Quadrant 2024 is currently open. So if you’d like to find out how to find growth compounders that can 3X-5X your money within the next decade…
Go check out The Alpha Quadrant 2024.
More related articles on growth compounders
– A power stock selection stack to 3X – 5X your investment
– Where to find 10X stocks?
