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Smith & Nephew (SNN): 2019 Top Picks' Mid-Year Update

07/16/2019 5:00 am EST


Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

Nancy Zambell, editor of Wall Street's Best Investments, chose Smith & Nephew plc (SNN) as her top conservative investment idea for 2019. The stock rose 16.5% in the first half of the year. Here's her latest update on the healthcare firm.

The low beta for Smith & Nephew was the first characteristic that brought this stock to my attention. Beta compares the volatility, or systemic risk, of a stock to the volatility of the market.

SNN’s beta today is just 0.14, which means its volatility, in relation to the broader market, is limited. But because one ratio does not tell us everything, we need to know to evaluate a stock, so we need to look further.

Smith & Nephew pushes several of my analysis buttons, including its fundamental strength, its ability to boost its global growth, and its membership in the healthcare sector, which has seen average gains of 9.1% so far in 2019. SNN has returned 20.3%.

The company makes medical devices — primarily for hips and knees — and sells them in more than 100 countries around the world. Additionally, the company offers devices used in the stabilization of severe fractures and advanced wound care products.

Smith & Nephew is growing organically and by acquisition. Its latest acquisition offers digital surgery and robotics joint reconstruction. This technology is being used in more than 40,000 orthopedic cases each year at more than 500 accounts worldwide.

For its first quarter, Smith & Nephew reported sales of $1,202 million, up 4.4%, with growth across the board, throughout its three franchisees.

At the end of the first quarter, 13 hedge funds tracked by Insider Monkey were long on SNN, up 18% from the previous quarter. The top holders are Arrowstreet Capital, which owns $161.3 million of SNN’s stock and Fisher Asset Management, which has a $49.8 million investment.

SNN attracted several new hedge funds, including PEAK6 Capital Management, Laurion Capital Management, and BlueCrest Capital Mgmt. Although the shares have climbed nicely, I believe there is more room to grow. So, if you haven’t bought in yet, it is a good time to do so.

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