Considering I took my own advice yesterday to add to my portfolio stocks I already own when they have been beaten down in price I thought I would add Fisher & Paykel Healthcare[FPH.NZ] to this latest in the series of Why did you buy that stock? I am particularly bullish about this stock for a number of reasons.
Why did you buy that stock?
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Why did you buy that stock? [The Warehouse Group]
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As far as long term possibilities for good sustainable growth (PDF) I would pick this stock to do better than anything else listed on the NZX with the possible exception of Pumpkin Patch Ltd [PPL.NZ] .
The outstanding reason, above all else, why I bought this company is the economic moat that management have carefully built for it over many years. Fisher & Paykel have delivered this moat by spending a large proportion of funds on research and development to keep products like their specialist sleep apnoea technology and other breathing apparatus at the cutting edge and as a result streaks ahead of their competition.
Management have built a solid reputation around the worldwide health care community, especially in the United States, for supplying reliable, easily updated and unique, world beating innovations in health care and hospital buyers around the world automatically think FHP first when they think of breathing products to buy. The amount spent on R & D is important for company future and will help retain that economic moat, where other companies struggle to compete with FPH's products.
Closely related to the ability of the company to build such a strong economic moat, the number two reason for me to buy this stock is the quality of the management.
CEO Michael Daniell and his team have led a company that has maintained excellent revenue growth (DOC) over the years and their focus on management of roll outs of new products and the marketing and selling to clients at health care provider level have been one of the keys to FPH's long term success and will clearly be of importance going forward.
As noted by me already the priority for the company placed upon research and development show that management have grasped the essence of what their company is and how they will maintain their enviable position at the top of their field among their peers. Sadly many New Zealand company managers lose sight of what is important to their company and flounder as a result. Their sister company Fisher and Paykel Appliances[FPA.NZ] could learn a thing or two from them.
Many investors might think that all this innovative,fast changing technology makes for a company that is hard to understand. Well, not really. The company's products may be a little difficult for the lay person to fully comprehend but the main thing the company does is look after people's health care needs in the specific fields that their products specialize in. Nothing Mensa like about that and it is because of this relative simplicity that I plunked down some hard earned shekels.
Personally I like to get involved in the companies that I invest in, in one way or another. For example I own shares in The Warehouse Group[WHS.NZ] and shop there whenever I can, it would be crazy not to because it puts money in my pocket when I do.
With Fisher & Paykel Health I'm quite excited about their disruptive sleep apnoea products. They are especially world leading and it is a fast growing market because of snoring problems caused by overweight and obese patients.
Its latest sleep apnoea product has been given FDA approval to be used in a home setting.
The size of the Sleep apnoea market and the company's products excited me so much because it can help so many people with this condition, including yours truly-that could explain alot to my regular readers.
Having more than a financial interest in your investment, according to some, could blind you to the financial fundamentals but it doesn't hurt, in my opinion, to have a passion or at least a cringing appreciation for what your company does to make its money.
As I always do in this regular series of columns, I ask myself, if after originally purchasing this share, and I have owned FPH for several years, would I still buy shares today? Well, I more than doubled my holding yesterday and am looking at a possible much larger purchase, probably about 20000 shares, if the price gets lower.
I am very happy with this company as part of my portfolio and see it as a stock I would never sell.
Fisher & Paykel Healthcare @ Share Investor
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The Big Money: Seven Steps to Picking Great Stocks and Finding Financial Security by Frederick R. Kobrick
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