Gone fishin'

Medical intervention -- services and technology -- is the market sector that perhaps represents my favorite fishing hole for new opportunities. By and large, most companies of this ilk survive and even thrive throughout the market's full cycle. This occurs despite the many caveats and cavils: reimbursement policies from the government (Medicare) and private insurance (HMOs, etc) -- many times a negative reimbursement change impacts negatively the shares. Also keep in mind the potential risk of the sudden death or deaths due to an experimental procedure. Yes, many risks prevail in this particular sector.

Nonetheless, I return to this sector time and again, and note the market leadership the sector and group (in particular, medical technology) again provides. For example, and to list several, Celgene/CELG, Cutera/CUTR (get it?), Genentech/DNA, Gilead/GILD, HoLogic/HOLX, Iris/IRIS, Lifecell/LIFC, Nurometrix/NURO, Palomar Technology/PMTI, Quality Systems/QSII, Stericycle/SRCL, Varian Medical/VAR, and many, many others. As I am already long many of these mentioned, in all fairness (and as previously stipulated), I want to bring to your attention one I do not yet own.

NuVasive/NUVA, a medical device company focused on developing products for minimally disruptive surgical treatments for the spine, announced today third quarter financial results for the period ended September 30, 2005.

Highlights:
* Generated revenues of $15.1 million - up 48.6% year-over-year
* Gross profit increased to $11.8 million - up 56.5% year-over-year
* Gross margin was 78.2% - up 400 basis points year-over-year
* Surgeons trained on MAS(TM) Platform totaled 99 - up 59.7% year-over-year
* Sales force exclusivity increased to 30%, up from 21% from the prior quarter
* Launched five new products within MAS Platform for a total of nine in 2005
* Acquired NeoDisc(TM) cervical disc replacement device
* Acquired dynamic stabilization technology and launched first product as ExtenSure(TM)

[click to enlarge]

Let us examine more closely this presumed base...

1) Note the duration of the base - now ~4 months;
2) Note the separation of time between the high trade and the subsequent low trade - almost precisely 3 months;
3) Note the diminution of the downtrend during the past ~5 weeks, itself a transition from left side (decline) to middle (base) of this pattern;
4) Note the potential (and probable) double bottom, which would be confirmed at a trade -- and preferably a close -- above $18.70 (each highlighted in the chart);
5) Note the looming breakout above the correctly identified trend line of declining tops, at ~$18;
6) Note the low and reversal on 8 November, which likely represents the turn from intermediate term decline to intermediate term rally.

These items I denote above showcase a stock close to its moment of reversal -- in both time and price; moreover, this moment likely represents a low risk, high return entry point. However, as this stock trades more thinly (less average daily volume) than I typically prefer, I will downsize accordingly my position interest. I will, however, purchase one lot today.

Questions...?