Looking around the market, I can see why some investors are nervous. Tesla and Palantir are both going for nosebleed valuations, while some speculative stocks outside the S&P 500 are in a bubble.

Ultimately, nobody knows if the S&P 500 will crash this year. But if it does, I would like to buy this stock.

The business

The share in question is Intuitive Surgical (NASDAQ:ISRG), the global leader in robotic-assisted surgery. Its systems help surgeons carry out procedures with more precision and stability, creating better outcomes for patients.

Intuitive is certainly not a small company any longer, with a price rise of 800% since 2016 taking its market cap to $192bn. Indeed, this would be enough to make it the fourth-largest listed firm on the London Stock Exchange!

Yet despite its significant size, Intuitive is still growing strongly. In Q4, worldwide procedures with its da Vinci surgical system grew roughly 18% year on year, while Ion procedures surged by about 44%.

The da Vinci is Intuitive’s flagship machine, and it placed another 1,721 of them in hospitals last year. This brought the total global installed base to more than 11,000 systems. Around 3.15m procedures were performed with da Vincis last year, an increase of 18%.

The Ion is specifically designed for minimally invasive lung biopsies, helping detect lung cancer at its earliest, most treatable stages. In 2025, the firm placed 195 Ions, with procedures growing 51%.

This all helped full-year revenue grow 21% to just over $10bn, with earnings set to be announced on 22 January.

The stock

The beauty of this business model is that when Intuitive places a machine in a hospital, it essentially acts like a high-margin cash machine for years. That’s because the instruments (staplers, scissors, forceps, etc) regularly need replacing.

Add in the maintenance and software updates needed to keep the robots running, and more than 80% of the top line is recurring revenue.  

In 2026 though, management is projecting 13%-15% growth in da Vinci procedures, suggesting a slowdown over last year. This adds risk because the stock is trading at 56 times forward earnings. That’s a significant premium to the S&P 500.

At this price, I see too much valuation risk, particularly if growth expectations slightly disappoint the market. There’s also rising competition in the robotic-assisted surgery space, especially from Medtronic.

Still bullish

Looking further out, I’m very bullish on Intuitive Surgical. Its da Vinci SP, which performs complex surgery through a single incision or a natural orifice like the mouth, just got FDA clearance to perform inguinal hernia repair, cholecystectomy, and appendectomy procedures.

So the applications for its robots continue to grow, while its newest da Vinci 5 has 10,000 times more computing power.

According to the NHS, half a million operations will be supported by cutting-edge robotic surgery every year by 2035, up from 70,000 in 2023/24.

What we have here then is a wonderful company with strong growth potential whose stock is trading very expensively. But if a market meltdown sparks a significant pullback, I’ll jump at the chance to buy more shares.

The post If the stock market crashes in 2026, there’s 1 S&P 500 stock I’ll buy appeared first on The Motley Fool UK.

Market leader

Intuitive Surgical (NASDAQ: ISRG) is a stock I’ve owned for years. The company pioneered the field of robotically-assisted surgery with its flagship da Vinci system. According to various sources, it commands an estimated 60% share of the global robotic surgery market.

Compared to traditional surgery, this method often leads to shorter hospital stays, reduced pain, and faster healing due to smaller incisions and enhanced control systems. The robotic arms filter out a surgeon’s natural hand tremors. 

An increasing number of hospitals now lease rather than buy systems outright. But either way, they still pay for the disposable instruments needed to operate them. This razor-and-blades model generates sticky, recurring revenue. Indeed, 84% of the firm’s $8.35bn in revenue last year was recurring (including operating leases).

Moreover, once surgeons are trained, hospitals tend not to switch, giving Intuitive a wide moat (high switching costs).  

Tariff headaches

However, these wide-moat shares usually command a high premium. And that’s why I tend to wait patiently for rare dips in Intuitive Surgical’s share price to add to my position. 

As such, a 26% drop since February has caught my eye. Buying on these types of dips has worked out well for investors in the past. 

But why is the stock down? It’s mainly due to tariffs, as the company manufactures in Mexico. During a recent healthcare investor event, management said it expects a 100 basis point margin hit this year. But it could be higher in 2026, assuming nothing changes.

The sweeping tariffs are obviously a nightmare for lots of companies. Adding to the confusion is whether they’re even legal, with US courtroom battles ongoing.

Management confirmed it has things to mitigate any future impact, including price increases as a last resort. Over the medium term, it’s targeting a 70% gross margin, up from a forecast 66% this year. But clearly on-off tariffs are an ongoing challenge.

Watching closely

According to Yahoo Finance, the stock’s five-year price-to-earnings-to-growth (PEG) ratio is 2.7. While that’s above the conventional benchmark for perceived fair value (1), it’s a significant discount to previous years. 

Perhaps that’s warranted given the uncertainty, but it doesn’t really change the longer-term outlook for me. The global robotic surgery addressable market remains very large, with both volume and type of procedure likely to grow significantly.

In Q2, worldwide da Vinci procedures increased 17% year on year, with 10,488 systems installed globally (up 14%). 

Meanwhile, the firm has launched the fifth generation of its da Vinci surgical system. With 10,000 times the computing power of previous models, this has advanced artificial intelligence (AI) capabilities, including processing real-time data to give surgeons AI-driven insights during procedures.

Admittedly, the stock isn’t anywhere near bargain territory yet. But Wall Street does have a 12-month price target of $593, which is 31% higher than the current $453 share price.

I’m watching it closely. If Intuitive Surgical falls towards $400, then I will buy a few more shares. Investors looking for a leading robotics stock might want to take a closer look themselves.

The post 1 top S&P 500 stock on my ISA radar appeared first on The Motley Fool UK.

In the last five years, passive index fund investors have earned a 110% return. That’s a 16% annualised gain versus the usual 10% investors have come to expect. Those are some pretty phenomenal gains. And it’s more than enough for a 50-year-old who’s just started saving for retirement to build a sizable nest egg.

Estimating retirement wealth

Let’s assume an investor has just turned 50. They intend to retire at the age of 67, and through no fault of their own, they currently don’t have any retirement savings. With £500 to spare each month, they decide to drip feed their money into an S&P 500 index fund. So how much money can they expect to have 17 years from now?

If the S&P 500 continues to outperform at 16%, a portfolio could reach as high as £521,600. That’s a pretty nice chunk of change. But if the index reverts back to its usual long-term trajectory, this pile could shrink to £266,100.

In practice, the latter seems more likely. Maintaining a 16% annualised gain is a pretty challenging task. And with most of the recent growth driven by cyclical spending, it’s likely prudent to take a more conservative view. Still, having just over a quarter of a million pounds in the bank is nothing to scoff at.

But what if we really want to keep that 16% gain? There are never any guarantees when it comes to investing. But when executed intelligently, stock picking can deliver such gains.

Moving beyond index funds

Stock picking‘s inherently more risky than relying on index funds. Apart from having to spend a lot of time analysing companies to discover which ones are duds, missing out on opportunities can result in substantial opportunity costs. And that can leave a custom portfolio to lag indices like the S&P 500.

Yet, for prudent and dedicated investors who discover the right opportunities, the rewards can be enormous. Take Intuitive Surgical (NASDAQ:ISRG) as a prime example. The healthcare technology company is the global leader in robot-assisted surgeries, operating with a highly profitable razor-and-blade business model. 

By offering its machines at a low margin to hospitals and then selling consumable components like scalpels at a high margin, the firm has become highly cash generative. And over the last 17 years, that’s translated into an average annualised return of 18.6% — enough to build a £711,350 retirement portfolio.

Taking a step back

Not every individual S&P 500 stock has outperformed, with plenty of promising enterprises failing to meet expectations. And despite being one to consider and a global industry leader, Intuitive Surgical has risks to take into account. Management’s warned of margin pressure on the back of US tariffs as well as a slight slowdown in procedure growth, potentially caused by rising competition.

Needless to say, if new market entrants are able to deliver a cheaper alternative to cash-strapped hospitals, Intuitive’s grip on the robotic surgery market might start to weaken. Nevertheless, I remain optimistic. And it goes to show that with the right businesses, a stock-picking strategy can potentially deliver superior returns.

The post If a 50-year-old puts £500 a month into the S&P 500, here’s what they could have by retirement appeared first on The Motley Fool UK.

With a plethora of index trackers available, a UK investor could buy into the S&P 500 easily enough. Exchange rate moves and tracker fund fees could mean that the actual return in sterling over the past five years would have been somewhat different to the 97% index growth.

Still, it has got me thinking: could now be the moment for me to add an S&P 500 index tracking share to my portfolio?

Not looking cheap

On balance, I do not think so. Currency moves in recent months have damaged the value of my existing US investments. I see a risk that unpredictable exchange rate movements could continue to be a feature of the US economy in coming years.

If the S&P 500 does well enough, however, that should come out in the wash – I could still be ahead. On top of that, while currency moves sometimes work against an investor’s favour, they sometimes actually help the total return.

My main concern about investing in the S&P 500 right now is a simple one of valuation. With a price-to-earnings (P/E) ratio of 29, the key US share index looks expensive to me. At the moment, by contrast, the FTSE 100 index has a P/E ratio of around 13.

Getting the right balance

In a way, that is not surprising. Some shares in the S&P 500 look very overvalued to me. Then again, they also offer the sort of growth prospects that can be hard to find on this side of the pond.

As an example, consider medical robotics maker Intuitive Surgical (NASDAQ: ISRG).

With a P/E ratio of 79, I think Intuitive Surgical looks badly overpriced. But I thought the same five years ago – and since then, the share has soared 179%. That beats the already impressive performance of the wider S&P 500 during that period hands down.

Why has Intuitive done so well even though I thought the share was already overvalued five years ago?

In short, it has a superb, proven business model. Robotic surgery machines can save healthcare providers costs and cut error rates. They are expensive to buy and once installed, Intuitive also makes money on peripherals such as sterile surgical instrument attachments.

Thanks to its proprietary technology and a large database of previous surgeries, the company has built a strong competitive advantage. Over 17m operations have so far been performed with the company’s flagship product.

Last year, total sales revenue grew 17%, of which 84% is recurring such as peripherals and services.

Clearly this is an exceptionally strong business model. However, does that justify the current market capitalisation of $193bn?

I do not think so. A new chief executive starting tomorrow (1 July) has big boots to fill. Funds have been pouring into AI startups including in the field of robotic surgery. Intuitive has a big lead, but that may decline over time.

Not only do I feel that Intuitive looks overvalued, I feel the same way about the S&P 500 overall at its current level.

So I will not be investing in an S&P 500 tracker, although I will continue to hunt for any individual constituent shares that I think offer me good value.

The post Up 97% in 5 years! Time to invest in the S&P 500? appeared first on The Motley Fool UK.

Reports say that the administration is looking into ways to remove Powell. As no president has removed a Fed Chair before, more uncertainty is being stirred up for stock investors.

Choppy waters

The S&P 500 has now fallen 16% since mid-February. The way things are going, 20% now looks like a distinct possibility. This would put the index into bear market territory — the first time since 2022.

Nearly half of my Stocks and Shares ISA portfolio in terms of value is made up of S&P 500 stocks. These include Visa, Nvidia, Intuitive Surgical (NASDAQ: ISRG), Uber Technologies, Axon Enterprise, and CrowdStrike.

I’m happy with the quality and resilience of these companies. They all have very strong competitive positions, ranging from digital payments (Visa) and AI chips (Nvidia) to cybersecurity (CrowdStrike) and taxis (Uber).

While a potential recession would knock consumer and business confidence alike, people will still be paying for things via their credit and debit cards and taking taxis. Meanwhile, businesses cannot afford to scrap cybersecurity, especially when hacking incidents are on the rise.

This is important because when a bear market strikes and stocks are falling, I want to have confidence that those in my ISA will likely bounce back when things start improving. And improve they will, as history shows that the S&P 500 has eventually recovered from every previous bear market.

In contrast, if my ISA was stacked with speculative stocks and firms with dubious business models, I would worry about permanent losses. That would make things much more stressful.

Investing during the storm

Recently, I have been buying a small handful of stocks that suddenly fell 25%+. My ISA still has a bit of cash left in it to carry on doing so over the next few weeks.

One stock from the list above that I’ve been waiting to add to for ages is Intuitive Surgical. Through its Da Vinci surgical systems, the company is a global leader in robotic-assisted surgery.

There are around 10,000 Da Vinci machines in hospitals worldwide, and last year surgeons carried out nearly 2.7m procedures with them. Once they are installed and professionals are trained, there are very high switching costs, giving Intuitive a wide moat.

However, there are a couple of specific threats hanging over the firm right now. One is rising competition from medical device giants Medtronic and Johnson & Johnson. Both are hoping to muscle their way into the lucrative robotic surgery space.

Another uncertainty is tariffs, with much of the firm’s manufacturing done in Mexico.

Intuitive’s share price has dipped 23% in three months. However, the forward price-to-earnings ratio here is around 58. That’s about in line with its five-year average but a big premium to the S&P 500 (20). This tells me the stock is not yet on sale.

As it happens, the robotics pioneer reports its Q1 2025 results today. I’ll see what management says and how the stock responds in the next few days before taking another look.

The post My ISA is ready for an S&P 500 bear market appeared first on The Motley Fool UK.

Yesterday (10 March), a lot of fear emerged in the US stock market. The Nasdaq Composite had its worst day since 2022, and is now down nearly 14% since December, pushing it deep into correction territory. Meanwhile, the S&P 500‘s slumped 8.7% in less than a month.

The sharp sell-off relates to President Trump’s on/off tariffs and US recession fears. We don’t know whether this is just turbulence or the start of a market meltdown.

Either way, I’m seeing high-quality stocks that were overpriced start to look attractive again. By following Buffett’s aforementioned golden rule , I think there could be some solid buys emerging for my portfolio.

One I’ve been waiting for…

During such scary periods… widespread fear is your friend as an investor, because it serves up bargain purchases.

Warren Buffett.

One position in my portfolio I’ve been wanting to add to for a good while is Intuitive Surgical (NASDAQ: ISRG). The company is a global leader in robotic systems used in minimally invasive surgery.

Its flagship da Vinci machine gives surgeons greater precision, enhanced dexterity, and improved control. This reduces the risk of complications compared to traditional surgery, generally leading to quicker recovery times and shorter hospital stays. A win-win all-round.

The stock’s been a monster success, soaring almost 800% over the past decade. However, it’s down nearly 21% since mid-January, potentially offering me the dip-buying opportunity I’ve been waiting for.

Massive installed base

Last year, Intuitive grew its installed base of da Vinci surgical systems to 9,902, a 15% increase over 2023. Full-year revenue grew 17% to $8.4bn, with 84% of that recurring from instruments, accessories, service contracts, and system leasing. Net profit jumped 29% to $2.3bn.

In Q4, worldwide da Vinci procedures increased 18%. However, management sees procedures increasing 13-16% this year, with the gross margin at 67-68% (down from 69%).

Tariff uncertainty

Now, there are risks here because a significant portion of Intuitive’s instruments are manufactured in Mexico. We have no idea what’s going on with the proposed US tariffs on Mexican products (details change daily). But management warns that they could have a “material impact” on margins.

In response, the firm might be forced to increase prices, which could impact growth. So this is something I’m keeping an eye on.

Meanwhile, at $482, the stock isn’t yet a bargain purchase, trading at 60 times this year’s forecast earnings.

My move

Due to ongoing market fear and the high valuation, I think the stock might slip a bit further from here. If it does, I’ll make my move, as Intuitive has a rock-solid moat built on market dominance, high switching costs, regulatory barriers, and recurring revenue.

It also spends heavily on research and development to stay ahead. In Q4, 174 out of 493 systems placed were the da Vinci 5. This next-generation machine features force feedback technology, allowing surgeons to feel the forces exerted on tissues during procedures.

Plus, with 10,000 times more computing power, they’re built to enable the future of artificial intelligence (AI) and machine learning in surgery. This state-of-the-art system could help power many more years of double-digit growth and I feel the stock is worth considering.

The post Stock market meltdown? I’m following Warren Buffett’s golden rule appeared first on The Motley Fool UK.

Here, I’m going to highlight three brilliant S&P 500 stocks that have returned more than 20% a year over the last decade (in US dollar terms). Let’s get into it.

Amazon

First up, we have Amazon (NASDAQ: AMZN) and I calculate that over the last 10 years, its share price has risen 1,223%, which translates to about 29% a year.

I first bought this stock for my own portfolio in late 2020 (near $150) and it has done well, rising nearly 60%. I just wish I’d bought it sooner.

Back in 2017, I remember looking at it when it was around $60 and thinking it was too expensive (the price-to-earnings (P/E) ratio was very high). The lesson here – expensive stocks can still generate amazing long-term returns.

Looking ahead, I remain excited about this stock (it’s my largest holding). Given how diversified the company is (e-commerce, cloud computing, digital advertising, etc), I believe it still has substantial long-term growth potential.

That said, if an investor was looking to buy Amazon shares, I’d suggest they consider waiting for a pullback. Since August, the stock’s had a huge run and if upcoming earnings (next week) miss expectations, it could be volatile.

Mastercard

Another US stock that’s done well for me, and has been a brilliant long-term performer, is payments powerhouse Mastercard (NYSE: MA). It’s up about 590% over the last decade which equates to a return of about 21% a year (it’s also paid small dividends).

Like Amazon, I believe Mastercard has a ton of potential. In the years ahead, billions of transitions are set to shift from cash to card. Meanwhile, growth of industries such as e-commerce and travel should also benefit credit card companies. So for me, this is a core holding I expect to retain for many years.

That said, the valuation’s relatively high right now. Currently, the P/E ratio’s about 35. That doesn’t leave much room for setbacks (eg a slowdown in consuming spending). So again, if an investor was interested in this stock, I think they should, again, consider waiting for a pullback.

Intuitive Surgical

Finally, we have Intuitive Surgical (NASDAQ: ISRG), the leading player in the robotic surgery market. It’s risen about 956% over the last decade, which translates to a gain of around 27% a year.

This is a stock I’ve had on my watchlist for many years now. I nearly bought it a few years ago when it was under $250. I wish I had – now it’s near $600.

I’m keen to get this stock into my portfolio at some stage because I expect the market for robotic surgery to grow significantly over the next decade. However, the 72 P/E ratio’s too high for me right now. This leaves almost no room for error. If hospitals were to slow their spending on robotic surgery, the stock could underperform.

So for now, it’s also going to stay on my watchlist. I’m hoping the price comes down a bit in the next 12 months.

The post 3 S&P 500 stocks that have returned more than 20% a year over the last decade appeared first on The Motley Fool UK.

Here, I’ll look at a pair of US-listed growth shares that have been marching upwards for years. But in the fourth quarter of 2024, they did the business again and were duly rewarded with further price gains.

Looking at their dominant competitive positions today, I think both are set up for further market-beating performances over the long term. I feel both are worthy of further research.

Intuitive Surgical

The first is robotic-assisted surgery pioneer Intuitive Surgical (NASDAQ: ISRG).

The stock was already up more than 150% in the five years prior to 15 January when the company released a Q4 trading update. Yet the market’s been happy to add another 12% after Intuitive said it expects 25% top-line growth (about $2.41bn) rather than Wall Street’s 14%.

This surprise beat came after it placed 493 of its da Vinci surgical systems during the quarter, including 174 of its latest da Vinci 5 robots. This next-generation iteration has 10,000 times the computing power of its predecessor!

For the full year, Intuitive placed 1,526 da Vinci systems, an 11% increase, taking its total installed base to about 10,000. And it expects full-year revenue of around $8.35bn, a 17% rise.

This is encouraging for shareholders due to the firm’s razor-and-blades business model. The more surgical robots it places, the more revenue it gets from selling instruments and accessories needed to run them. Most of the company’s revenue is recurring.

One key risk here would be another pandemic. During the last one, the company’s revenue declined significantly as operations were delayed or cancelled. Also, trading at 78 times forward earnings, this high-quality stock’s far from cheap.

However, the company remains a global leader in the robotic-assisted surgery space, and the long-term future continues to look very bright.

TSMC

The second company that released blowout Q4 numbers was Taiwan Semiconductor Manufacturing (NYSE: TSM). The stock’s up 9% since the chipmaking giant reported $26.9bn in quarterly revenue (up 38%) and a 57% rise in net profit ($11bn). Both figures beat Wall Street’s expectations.

Many tech firms outsource their chip manufacturing to TSMC, including Apple, Nvidia, Advanced Micro Devices, Broadcom, and Arm Holdings. And it’s custom AI chips that are really driving growth, with revenue from artificial intelligence (AI) accelerators more than tripling in 2024.

The firm’s now predicting revenue will grow at a five-year compound annual growth rate (CAGR) of 20%!

One challenge would be an unexpected slowdown in AI spending, especially as many of TSMC’s other markets are weak right now (notably smartphones and electric vehicles). It’s really the insane growth of AI that’s offsetting this weakness.

As for valuation, the forward P/E ratio’s 25. That strikes me as reasonable for a dominant company growing at 20% a year and capturing around 90% of high-performance computing chip orders.

Looking ahead, the demand for semiconductors is only likely to increase as megatrends like AI, cloud computing, 5G, electric vehicles and robotics play out. TSMC’s perfectly placed to benefit as the chip manufacturer of choice for many blue-chip firms.

The post 2 incredible growth stocks that crushed it in Q4! appeared first on The Motley Fool UK.

It means an investor who put 10 grand into an S&P 500 index tracker at the start of year is now sitting on about £12,510. Even a bit more with dividends.

A great year for US shares

Like many investors, I have a few S&P 500 stocks in my portfolio. And beyond Airbnb, which is flat, Uber, which is down 11% since I invested, and Moderna (don’t get me started), they’ve done very well for me.

Here they are and how they’ve got on in 2024:

• Axon Enterprise: +136%
• Intuitive Surgical (NASDAQ: ISRG): +58%
• Visa: +22%
• CrowdStrike: +39%

The Trade Desk isn’t in the S&P 500 yet, despite having a $60bn market cap after its share price surged 72% in 2024. But the digital advertising platform looks a shoo-in for inclusion at some point in 2025.

Of course, it’s important to recognise that we’re in the middle of a US bull market. And as the old investing saying goes: “In a bull market, everybody’s a genius.”

Nevertheless, it’s certainly been lucrative in 2024 to be invested in some high-quality S&P 500 stocks.

Lofty valuations

However, many such stocks are now richly valued. Intuitive Surgical, for example, is trading on a high forward price-to-earnings (P/E) multiple of 69.

To be fair, the firm generally tends to command a premium market valuation. That’s because it’s a global leader in robot-assisted surgery, with nearly 10,000 of its da Vinci surgical systems installed worldwide.

Once these complex machines are up and running in hospitals, the switching costs are massive. Surgeons, who are trained at significant cost to use them, are understandably reluctant to switch to rival systems.

As a result, Intuitive has built a formidable moat around its business, with attractive recurring revenue streams from the instruments and accessories needed to work the robots. The market loves this predictability, and the share price is up 168% in five years.

That’s not to say the company doesn’t face rising competition. It does, especially in China, so that’s something for me to monitor. Also, anything that disrupts operations (such as another pandemic) is a risk.

However, this is a wonderful company that boasts very solid financials. In Q3, revenue ticked up 17% year on year to $2.04bn, while adjusted net profit jumped 27% to $669m.

Looking ahead, an ageing global population should see rising demand for operations, and therefore Intuitive’s market-leading surgical robots. It’s a business I just see being much larger in future, as do most investors (hence the pricey valuation).

As things stand, I don’t plan on selling this S&P 500 stock for many more years.

The UK’s still cheap

While overall US stock valuations remain high, I’m going to be selective where I invest in 2025. I have a list of shares I’d like to buy or add to, including Intuitive Surgical. But only if the price is right.

Fortunately, many UK shares still look good value, so I can do some bargain hunting here in the meantime.

The post If an investor put £10k in the S&P 500 at the start of 2024, here’s what they’d have now appeared first on The Motley Fool UK.

The robotic-assisted surgery specialist has climbed by over 60% this year. Sceptics have been arguing that the firm’s big performance is only being driven by a backlog of delayed procedures created by the pandemic.

However, with each passing quarter, the company seems to be disproving this claim. In fact, it’s now beaten earnings expectations seven times in a row. That’s almost two years of consistent outperformance, resulting in a doubling of its share price. And yet, this might only be the tip of the iceberg.

The global leader in surgical robotics

Adoption of robot-assisted surgery has been relatively slow over the last 20 years. The technology’s expensive and most health insurance providers prefer covering the cheaper, traditional surgical procedures. However, this is a story that’s been slowly changing.

The cost’s still high. But it’s been falling steadily. And as an early mover within this burgeoning market, Intuitive Surgical’s now the global leader, with an estimated 50-80% market share worldwide. Its Da Vinci Surgical System seems to have become an industry standard, with hospitals and clinics adding it to their portfolio of medical equipment and investing time in training surgeons to use it.

Da Vinci’s currently the core of Intutitive’s business model, with a continued 18% jump in procedures in its latest results. However, its new Ion System – a robotic minimally-invasive bronchoscopy solution – is seeing significantly faster procedure growth of 73%.

Given Intuitive operates with a razor-and-blade business model, more procedures mean more demand for its high-margin instruments, accessories, and consumables. And it’s a trend that doesn’t appear to be slowing anytime soon.

What could go wrong?

As impressive as Intuitive’s business appears, there are always risks for investors to consider. From a valuation perspective, this S&P 500 stock’s far from cheap. Limited competition grants management monopoly-like powers, resulting in staggering free cash flow generation as the robotic surgery market evolves. Even more so, given the risk of disruption from a new start-up, it seems unlikely due to the regulatory barriers to entry of the healthcare industry.

Needless to say, this advantage is pretty substantial, and it’s reflected in a premium valuation. But it also opens the door to volatility should performance fail to keep up with rising expectations.

It’s also important not to completely ignore established rivals. A tactic that’s being increasingly deployed by peers is creating systems for surgeries that Da Vinci and Ion simply can’t do yet. And once a surgeon’s been trained on these systems, convincing hospitals and doctors to invest time to retrain is a hard sell.

As such, a potential slowdown of R&D innovation is one of the biggest risks for this business, in my opinion. Having said that, the firm’s track record of defying expectations speaks for itself. And with the adoption of these technologies expected to continue rising for decades to come, this S&P 500 gem seems like a no-brainer for my portfolio even at a premium valuation.

I bought some of its shares recently and expect to buy more next month.

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