Opportunity Knocks

Opportunity Knocks

What happens when a company is just killing it? Increasing sales, investing in the future, great partners and best in class product. By every indication they are blowing away analysts estimates and the future looks very bright. Just for grins and giggles let’s throw in a solid seasoned management team that knows what they are doing.

Well if this company happens to be in the wacky world of diabetes investors will foolishly sell off shares at the smallest hint of trouble. This is exactly what’s happening to Dexcom (NASDAQ:DXCM) this morning after they reported third quarter results. Never mind that this is the best run diabetes device company and as we noted just yesterday they have a very bright future. Nope the street as always is focused on the short-term and can’t see the forest through the trees.

Now to be honest here we don’t expect every earnings call to be full of kibbles and bits, we are not stupid no matter what’s said about us on Twitter. Which is why we would advise anyone to add to their holdings when shares trade lower. The reality is we have seen this movie before and like how it ends.

Yesterday while listening to the call Diabetic Investor was struck by how much these calls reminded us of the calls made by MiniMed before it was acquired by Medtronic (NYSE:MDT). Just as Dexcom is killing it today, MiniMed was killing it back in the day. Just as Dexcom is blowing away analysts estimates today so too was MiniMed back in the day. The two companies also share several other commonalities- put the patient first –invest in the future and most importantly run the company as if it will never be acquired – run it so it can survive and prosper no matter what.

This philosophy is in sharp contrast to Insulet (NASDAQ:PODD) who reports earnings later this afternoon. The fact is Insulet was built to be acquired and when that didn’t happen they were caught unprepared. As we have said many times it’s easy to build an insulin pump yet it takes real talent to run an insulin pump company. Talent is something Insulet lacks and Dexcom has in abundance.

So take it from someone who has a few gray hairs and has seen this movie before. The names may have changed somewhat but the ending will be the same bringing many happy returns to Dexcom stakeholders.