Is Intuitive Surgical (ISRG) A Smart Long-Term Buy?

ClearBridge Investments, an investment management firm, published its “Large Cap Growth Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge Large Cap Growth Strategy underperformed its Russell 1000 Growth Index benchmark during the second quarter. On an absolute basis, the Strategy had gains across seven of the eight sectors in which it was invested (out of 11 sectors total). The leading contributors to performance were in the IT sector. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Intuitive Surgical, Inc. (NASDAQ: ISRG), and discussed its stance on the firm. Intuitive Surgical, Inc. is a Sunnyvale, California-based medical robotic products developer and manufaturer, that currently has a $113.1 billion market capitalization. ISRG delivered a 16.73% return since the beginning of the year, extending its 12-month revenues to 58.04%. The stock closed at $955.08 per share on July 14, 2021.

Here is what ClearBridge Investments has to say about Intuitive Surgical, Inc. in its Q2 2021 investor letter:

“Within health care, we added a new position in Intuitive Surgical, a maker of robotic instruments for soft tissue surgery. The market for such procedures is enormous, including those performed with the aid of the company’s DaVinci machines, whose threedimensional imaging capabilities require smaller incisions, resulting in less nerve damage and bleeding and shorter patient stays. DaVinci machines are a $1 million plus investment by hospitals that can be run continuously through the day, allowing for a greater number of procedures with less physician fatigue. Surgeons are trained on the device from medical school and residency on up. Combining the related training and supply chains, these purchases are very sticky. We see the opportunity for Intuitive Surgical to benefit from more indications for the devices, procedure growth and greater sales in hospitals and surgical centers.”

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Based on our calculations, Intuitive Surgical, Inc. (NASDAQ: ISRG) tops our list of the 30 Most Popular Stocks Among Hedge Funds. Intuitive Surgical, Inc. was in 53 hedge fund portfolios at the end of the first quarter of 2021, compared to 49 funds in the fourth quarter of 2020. ISRG delivered a 18.94% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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Disclosure: None. This article is originally published at Insider Monkey.