Key insights
- The author suggests a dip-buying strategy focused on sector leaders showing relative strength in MedTech (ISRG) and SaaS (MSFT, ORCL, PANW). ISRG's strong fundamentals and recent earnings are highlighted, while NOW is considered for addition pending further weakness. This indicates a potential rotation towards quality and defensive growth within these sectors, offering a mildly bullish signal for select large-cap equities.
So the only way to buy the dip is buy the sector leader that stop or go down less than peers.
In the recent few weeks and especially few recent trading sessions, I’ve noticed that a few sector leaders in med tech and software holding up well and chart looks good. Want to hear any current holders think:
Med tech: ISRG - Excellent recent earnings print followed by an 8% positive reaction. But the rally didn’t last a second day which reflected the overall down trend of the med tech sector. However, the sell off from ISRG is less pronounced compared to other names in the sector such as ABT, BSX.
Chart looks ok here as the price held above the pretty strong support of $450 and selling strength is coming off showing a rsi bottom divergence and slightly elevated volumes.
Fundamentally, the stock looks good. The company has minimal debt (170m debt vs 3.4b of cash & fcf of 2.5b), has a 10 billion topline (growth of 20% both ttm and qoq) with a net margin of 30% and almost fully converts into fcf. Plans to buyback 1.3% stock this year. And it is trading at lowest mults in years. Sounds to me that management is buying back shares as the stock isn’t expensive and retains the rest to grow the business.
Software:
I already hold a basket of names that didn’t really go down at all in April: MSFT, ORCL, PANW. Looking to add NOW but it needs to stop going down first. Ideally I want another bad news to come as sectors mostly bottoms on bad news. NOW had great news and still went down, meaning there is more room to drop.