Chicks Eye View: Unscramblilng Monday's Egg

The Chicks had our monthly meeting last night. It was time to decide where we should invest our $1500. The new companies that were in the running were; Estee Lauder (EL), Zebra Technologies (ZBRA), Gilead Sciences (GILD), 3M (MMM), and Medtronic (MDT). But after much discussion, sweating buckets (by me) and vote tally re-counts, we decided to reinvest in our already owned EMC. (Chicks can't resist a sale, and EMC is off its 52-week high by 63% and their financials are still very strong. We are suckers for sales.)

We've already covered Estee Lauder and 3M in this column, but just who are the other three? Chick Susie proposed Zebra Technologies, Chick Kristin proposed Gilead Sciences and Chick Lynn proposed Medtronic. Today I'd like to highlight Medtronic (MDT) because it seems our Vice-President is in need of their product today. (In case you haven't heard, V.P Dick Cheney is in the hospital after having suffered from heart pains this afternoon. He has had reoccurring heart troubles in the past, even having a coronary stent insterted.) Anyway, I'm sure Medtronic would have won the vote if Chick Lynn had not missed the meeting. (She was on a plane.) When you're a Chick and propose a company, it really helps if you are at the meeting. In all the hoopla surrounding the vote, if you aren't there to defend your choice or rally behind it's numbers and future, it'll get lost and fall on the internet floor. Medtronic got lost. (Lynn, I voted for it in the first round!! Really I did!!) Anyway, since I've taken on being the coach of my daughter's floor hockey team and can't find another minute to do my own research on the company, I thought I'd steal Lynn's. Thanks Lynnie... smooches! (That's a Lynn word.)

1. Buy what you know All of us have known someone in our life that has had a cardiac, neurological, spinal or vascular health problem and have needed the help of Medtronic. Hello Mr. Cheney. Medtronic manufactures and sells device-based therapies for these medical problems. Lynn originally proposed this company because her husband is a doctor, and he knows this company and industry well. Medtronic is also based in Minneapolis, Minnesota... Lynn's backyard.

2. K.I.S.S. An opportunity to extend life! Medtronic makes products that help people deal with chronic diseases such as heart conditions (they are the leaders in the pace-maker industry), digestive problems, bladder control problems, spasticity seizures and fainting. They are a company dedicated to lifelong solutions for people with chronic disease. There are 2.5 million patients a year that benefit from this technology!

3. Industry They are in the Health Care sector of the market with their industry being Medical Equipment and Supplies. As to whether or not I feel this industry is going to grow faster than others, it came up at our meeting last night. The baby boomers are aging! This means there are more and more people entering their chronic disease years. (I was trying to think of a politically correct way to put it... their retirement years? Their "visit-the-doctor-three-times-a-month" years?) I can only say from personal experience, the older you get, the more you see the doctor with diseases you don't get in your 20's. Medtronic is the company that we will be relying upon for their technology in heart disease, neurological disorders, vascular illnesses, cardiac rhythm management, cardiac surgery, and neurology, oncology, spinal and ENT surgery.

4. Leader In It's Field It is the leading medical technology company in the world!! As I look at their competition, Biomet (BMET), MiniMed (MNMD) and St. Jude Medical (STJ), there isn't one that even comes close. Get this, Medtronic's sales are greater than 800 times the next in line. From their market value to their net earnings, this company is heart stopping, (or starting, depending on your politically correct age.) Medtronic's has maintained its market-leading positions and will continue to as they were awaiting several key new product approvals. No resting on your keister for this company.

5. Repeat Profitability As is the case with our Vice-President...when you have a chronic disease such as heart problems, it never ends. You keep going back and back and back again for more testing and newer devices. There are 2.5 million repeat customers per year!!

This means that they have 54 more times the cash as they have long-term debt. Ba-da-bum.

10. Increasing growth Medtronic's press release on Feb 21, 2001 reported an 18% increase in earnings per share in their multiple market segments. Their growth came mainly from their pacemaker, coronary stent, and spinal business. What I loved most about this company (and was why I was trying to rally behind it in Lynn's absence) was it's increasing growth in our entire Chicks Dozen criterion. Here is how Medtronic has done for the past year.

	EARNINGS REPORTED:
	10/27/00	7/28/00	4/30/00	10/29/99
Gross Margins	73%	75%	73%	73%
Net Margins	23%	22%	22.5%	20.9%
Cash/Long Term Debt	54x	52.5x	39.6x	9.7x
Flow Ratio	2.97	3.25	3.64	3.02
Sales (in millions)	1,361	1,309	1,432	1,258

Pacemaker sales led the industry with 11% growth this past quarter. As far as future growth, development milestones are being made for its new InSync III cardiac resynchronization system and the Medtronic Attain over-the-wire steroid-eluting left-heart lead. Phew....say that 10 times fast! In January and February of this year the US Food and Drug Administration approved several new defibrillators for US and Japanese market releases. I'm looking for some more growth from MDT! (Maybe I should reiterate what is happening to those old and wrinkly baby-boomers. Hehe, had to do it, Julie.)11. Strong Management and History Medtronic was founded in 1949 by Earl Bakken. He and his brother-in-law started in a garage in northeast Minneapolis where they repaired electronic hospital equipment. The company developed the world's first implantable pacemaker and other revolutionary products for cardiac rhythm disorders and continued on to what they are today - a $5 billion company working in 120 countries. Their mission is "to contribute to human welfare by application of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore health, and extend life!!Arthur D. Collins, Jr. has been President and Chief Operating Officer since August 1996. Prior to joining the company he was Corporate Vice-President at Abbott Laboratories. Other people on the board come from backgrounds working with Honeywell, Cargill, John Hopkins University, University of MN, a PH.D in Physical Chemistry and an MD from Cornell University, etc.

12. Buy on Sale 52 wk High: $6252 wk Low: $4452 wk Avg: $53Current price: $48.95

Thanks to "Smooches Lynnie", I'm keeping my eye on this company and let's hope this company keeps on ticking into the future.

Unscrambling Monday's Egg

Unscrambling Medtronic (MDT)