1 share I’d love to snap up in the next S&P 500 stock market crash

This writer reveals the world-class Nasdaq share that he’d most like to buy for his portfolio during a stock market meltdown.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Middle-aged white male courier delivering boxes to young black lady

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The S&P 500 is in full swing right now, having entered the third year of a bull market. But one thing history shows is that it’s just a matter of time before the stock market crashes again. It’s an inevitable part of investing.

To be clear, a correction is a drop of 10% from recent highs, while a crash is a decline of 20% or more. Neither is the end of the world. In fact, the second lesson from history is that the market has always eventually bounced back to scale new highs.

Therefore, I’d see a crash as a great time to do a bit of discounted shopping. And this is the one world-class S&P 500 share I’d like to buy more of during a market meltdown.

Surgical robots

I’m thinking about Intuitive Surgical (NASDAQ: ISRG), the pioneer in robotic-assisted surgery. Its flagship da Vinci system helps surgeons perform minimally invasive procedures, which often lead to faster recovery times and shorter hospital stays.

Last year, 2.2m procedures were performed worldwide using da Vinci machines. And over 15m have now been performed over the past two decades.

In Q3, worldwide procedures grew approximately 18%, and the installed base grew to 9,539, an increase of 15% compared with Q3 2023. Revenue jumped 17% to $2.04bn, while net income rocketed 36% to $565m.

Powerful business model

What I like here is that the vast majority of Intuitive’s revenue is recurring (83% last year). You see, every surgery with the robots require specific instruments and accessories that need regular replacement, generating consistent sales.

And as more systems are installed, this creates a recurring-revenue flywheel, where more installed systems drive more demand for accessories and services. Replacement instruments and accessories contributed 62% of total revenue for Q3.

Plus, once the firm’s products are installed in hospitals and surgeons are trained on them, there are very high switching costs. In other words, highly skilled professionals comfortable with the da Vinci system are unlikely to want to switch. This gives Intuitive a wide competitive advantage (or moat).

What am I waiting for?

That all sounds great, so why wait for a big dip before buying more shares? Well, after surging by around 100% in the past year, the stock is very expensive. At $513, it’s trading on a price-to-earnings (P/E) ratio of 82.

While the stock is rarely ever cheap because of the firm’s dominant competitive position and high-quality revenue, that’s still very pricey. In fact, its above the five-year P/E average of 72.

Also, Intuitive isn’t without risk, as shareholders found out during the pandemic when many elective operations were postponed. Revenue took a hit and the stock dropped 35% in one month in early 2020.

Therefore, another global pandemic is a key risk, while the company faces increasing domestic competition in China.

Created with Highcharts 11.4.3Intuitive Surgical PriceZoom1M3M6MYTD1Y5Y10YALL28 Oct 201928 Oct 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

A bright future

Still, I’d love to own more shares (at the right price) for the long term. The company’s next-generation da Vinci 5 system offers improved 3D vision for greater surgical precision, and increased computing power and data-gathering capabilities, offering the potential for self-improvement.

Looking ahead, the global market for robotic surgery appears nowhere near saturation point. According to most estimates, it’s set to grow briskly at a compound annual rate of around 17% through to 2030.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in Intuitive Surgical. The Motley Fool UK has recommended Intuitive Surgical. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »