My 2 cents on $TRXC -> Heed the wisdom from the Oracle of Omaha

Before you read on, please be aware that the analysis below is my opinion only and may include flawed assumptions and inaccuracy of logic; therefore, caveat emptor applies here.  Furthermore, all emphasis (color-coded, boldness, and underlined) on the excerpts are my own.

I believe the Oracle of Omaha needs no introduction since we are talking about Warren Buffett. A recent article about the Oracle of Omaha, “Warren Buffett: ‘We have operated in this country with the greatest tailwind you can imagine at your back’” made a timely appearance for me to borrow Buffett’s wisdom for this week discussion on $TRXC.

Let’s start with Buffett’s signature wisdom. Below is an excerpt from the article mentioned above:

“Buffett told this story in order to drive home his major point: Invest in something you believe in, that you know will succeed over time, and you cannot go wrong — invest in American business.”

  • Invest in something you believe in,
  • that you know will succeed over time
  • You cannot go wrong

While the above sound simple in concept, it is not easy to follow.  In life, simple is good, but it is going to take a lot of effort and fortitude to follow this simple recipe.

Let’s start with “something you believe in“.

Since we are all investing for reason of our own and our risk tolerance is different from each other, I am going to discuss the mechanism of how I come to believe in the stocks I invested in and how I handle the risk involved.

Logic and common senses

To those who follow my blog posts, you know that I used logic and common sense to support what I believe in amidst uncertainty.

Below is the essence of my logic for investing in $TRXC:

  • Choice
  • Future in robotic
  • Shortage of surgeons

I’ve already dealt with all threes above in my previous blog posts so I won’t go into details here. Choice offers an alternative to laparoscopy surgeons who dislike the way Da Vinci works.  This is no different than surgeons who favored the Mercedes Benz over the Cadillac.

Anything robotic is the future because our creativity demanded it.  In fact, efficiency in our production improved dramatically due to robotic involvement in the assembly lines.  Intuitive Surgical Inc. has successfully broken the barrier in using robotically assisted surgical device (RASD) in minimally invasive surgeries, and we should all be grateful for it.  Now, it is time for REAL competition to kick in for the benefit of advanced innovations in the robotically assisted surgical device..

Shortage of surgeons due to coming massive aging population demands efficiency that will reduce stress to the surgeons who used RASD. Reduced stress allows surgeons to operate more patients without sacrificing accuracy and attention to details.

That’s pretty much my logic/common sense for investing in $TRXC.

When it comes to “you know will succeed over time,” we are talking about RISK.

How will I know the company I invested in will succeed over time?  That is a million dollar question everyone wants an answer to!  Warren Buffett’s investment in soft drink, banking, and insurance companies are all based on his beliefs that these stable products and services will be needed no matter where the future is heading. Along with population explosion that exponentially increased the demand for soft drink, banking, and insurance services, the Oracle of Omaha becomes the legend to behold.

The next question is how did the Oracle of Omaha “pick” the right stocks such as Coca-Cola and Wells Fargo Bank to invest?  My understanding is that the Oracle focused intensely on the management of the companies he invested in.  So far, the Oracle’s track record is standing proof that buy and hold (of the right stocks) can and will work wonderfully.

Since $TRXC received the FDA clearance only recently for its Senhance robotically assisted surgical device, it does not have a history of sales like $ISRG.  So, without the benefit of historical sales to calculate potential sales trend, the risk is much greater than the risk of established companies like Coca-Cola and Wells Fargo bank. However, I’m betting that CEO Pope, with a successful career in sales, is the right CEO for $TRXC to bring Senhance to the laparoscopy community.  Hence, I’m counting on CEO Pope and my logic/common senses mentioned above to have the potential to mitigate the risk to form a more acceptable “calculated risk” in my book.  Of course, I must invest according to my risk tolerance. In other words, I’m betting with a core position that I’m willing to lose in a worst-case scenario.

Sidebar: Since I’m taking on a larger risk with the potential for greater return, I avoid using margin completely.  In other words, I invested with 100% cash to avoid the unpleasant event of being “forced out” of my position due to margin call during temporary market corrections.  However, that does not preclude me from getting out of my position due to failure of the company to perform as expected.

You can not go wrong” is entirely depended on my assessment of “what you believe in” and “what you know will succeed over time.”  TIME, as in within the next two years, is the critical factor in determining whether this last statement is true or false.

In a nutshell, the wisdom from the Oracle of Omaha, IMHO, is applicable to TransEnterix even though it doesn’t have the “solid” financial data like Coca-Cola and Wells Fargo Bank.  Of course, the risk is much higher because we are all waiting for proof of adoption.  Even though my logical deduction points to the imminent adoption of Senhance, uncertainty is always a volatile beast that can weave havoc to the stock prices. I believe recent sell-off of $TRXC to $1.7x level after touching $2.00 is the result of stockholders and short-sellers adjusting their risk in their portfolio for the coming Tuesday ER.

At the end of the days, we only need to remember the wisdom of Omaha to keep the “faith” in $TRXC. By evaluating the first two pillars of wisdom from the Oracle:

  • Invest in something you believe in,
  • that you know will succeed over time

We have a simple method to determine if the third pillar of wisdom:

  • You cannot go wrong

remains true or not.

Good Luck to everyone on Tuesday!

Don’t forget; all the above are my opinions only!

May fortune blesses all TRXC investors.

My 2 cents.

From my camera:

I like to think that the sales number $TRXC is announcing next Tuesday will be like this beginning bloom of a Japanese maple tree below.  Over time, Senhance will be all over the hospitals such as the maple leaves will be all over the branches.008

 

 



Categories: Daily trading Journal, trading journal

Tags: ,

1 reply

Trackbacks

  1. Weekly thought on $AEMD, $AMRN, $GRWG, $IBIO, $LRAD, TRXC – Trading my two cents

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: