Stock of the Week: An AI Power Player in Healthcare
Alpesh Patel|August 7, 2023
A Note From Amanda: Regular readers will know that Alpesh is incredibly bullish on the AI sector… and has even begun using AI in his own research. And while he’s shared several AI plays here in Stock of the Week that check the boxes of his strict investing system… he’s now going public with his absolute favorite way to play the AI boom.
This $7 stock is powering the AI market… yet is virtually unknown. This could be your best chance to get in on a life-changing megatrend. Get all the details here.
As the world’s population gets older… and healthcare gets more expensive… the companies working to reduce costs and improve patient outcomes should be on every investor’s radar.
And the companies doing it with even more efficiency thanks to AI?
Well, they could pay the biggest rewards.
That’s why you’re going to like the Stock of the Week I have for you today.
This company uses AI and machine learning to improve patient outcomes and reduce healthcare costs.
It’s got phenomenal revenues of $7.7 billion… and a presence in 150 countries.
Yet its forecast P/E is a dirt-cheap 17.5. For an AI play in healthcare? That’s just plain wrong.
This company is trading at 2016 levels… and is overdue for a breakout.
Get all the details on the stock – including the ticker – in this week’s video.
Click on the image below to watch it.
Hi, everyone. Welcome to another Stock of the Week.
Now, you know that over the past few weeks I’ve talked – whenever I’ve had the opportunity – about AI plays in my Stock of the Week videos.
Well, I’m really excited, and I want to share with you where and why I think AI is going to be huge.
And it’s not for the reasons you might think. I’ll explain that in a second.
I also want to give you some insights into where I think folks should look to take advantage of AI. And again, it’s not in the places you might think.
Now, first of all, why do I think it’s going to be huge?
We’ve already seen the accelerated pace at which it’s moving. We’ve started in our hedge fund incorporating AI into our workflows so we can check our work for the stocks that are being picked by my team and also see the ones we might be missing.
And that’s huge because the amount of data that AI can go through – and our ability to access that level of computing power – that didn’t exist 12 months ago.
So that’s the first thing.
The second thing is you hear people say, “Well, talk about specific sectors and industries.”
Let me tell you something: It’s across the board, and that’s what people are missing.
The journalists who talk about “10 AI stocks you must own now”… Let me tell you why they’re often missing what’s actually happening.
Most people don’t think of Chipotle as an AI play.
They think, “Oh, it’s a restaurant chain.”
We’ve done the research.
We can dig deeper and see that even in the restaurant business, let alone healthcare – more on that in a second – and finance, for instance, AI has a role to play in speeding up supply chains, reducing waste, reducing staff costs… all those efficiencies that lead to the bottom line.
Anyway, I’ve just released research on my favorite way to play the AI sector.
Let me tell you something: There are a lot of companies which claim to be AI which aren’t, and there are a lot of people saying “10 AI stocks to own now” because they’re trying to clickbait you.
Those aren’t the ones to play into.
Let me move on to my Stock of the Week. It ties in nicely.
It is, given everything I’ve said, an AI company. It’s Medtronic (MDT).
It integrates AI into the treatment of chronic neurological and cardiovascular conditions.
We know the world population’s only getting older.
The company uses AI and machine learning to improve patient outcomes and reduce healthcare costs in a number of areas, including cardiac care, diabetes management and spinal injury.
It’s developed an AI-powered software platform for spinal surgery, planning and navigation. And it’s got something called Medtronic GI Genius intelligent endoscopy module that’s used to identify precancerous polyps during a colonoscopy.
The company’s got revenues, more importantly, of $7.7 billion. Phenomenal.
It’s got a presence in 150 countries. That’s got to get you excited, right?
Now, let’s look at some of those financials, shall we?
On my proprietary Growth-Value-Income rating, it’s a 7. Remember, anything with a 7 or higher meets my minimum criteria.
This is my proprietary algorithm which looks at the valuation of a stock, the growth of a stock, the income of a stock, the cash flow of a stock, the momentum of a stock.
Forecast P/E ratio – in other words, its current share price compared to its forecast profitability – is only a multiple of 17.5.
Are you kidding me? 150 countries? Medical AI? Multiple of 17.5?
It doesn’t make sense.
Cash return on capital invested is low. I would like to have seen that number higher.
Performance over the last six months… It’s been treading water, which is why I think there’s an opportunity for getting in. The reward vs. the risk… It’s been underperforming.
So I think there’s time for it to catch up.
It has low volatility. I like low volatility, low risk.
So because it’s been underperforming the market, I think it’s been treading water. I think it had overshot. I think everybody got too excited. It’s pretty much at 2016 levels.
So you’re telling me in the last seven years, the share price is the same despite all the innovations in AI? Of course, that doesn’t make sense.
I think it’s about to go back from where it is now to kind of the levels we saw in 2021.
On a valuation based on discounted cash flow, it is slightly overvalued.
So we’ve got to allow for some of those valuation metrics saying that it’s still a bit expensive, and maybe that’s the reason why we’ve not seen it accelerate. But given that it’s been treading water for seven years, I think it’s time, and this one will catch up and accelerate ahead.
It’s too big to ignore – never mind too big to fail – too big to ignore.
I hope you liked it.
I hope you liked everything that I’ve been saying about AI and how to stay ahead of the game.
Thank you very much.