Surveying the wreckage

Surveying the wreckage

The day got off to bad start and unfortunately for Dexcom (NASDAQ: DXCM), Tandem (NASDAQ: TNDM) and Insulet (NASDAQ: PODD) it ended poorly too. First a look at the numbers Dexcom down $14.99 or 19.24%, Tandem down $3.15 or 58.88% and Insulet down $4.58 or 12.50% Ouch Double Ouch and Triple Ouch – Now a word of caution as Insulet reports tomorrow after the market closes, which means it could get worse before it gets better. And should earnings come in lower than anticipated or if there is any bad news watch out below.

Now we’re going to something we rarely do – we’re going to play analyst for a moment and recommend buying some of these stocks. Sorry but Insulet does not make this list at least not until we see earnings. But look at this on a year to date basis

Dexcom -23.16%

Insulet -15.18%

Tandem -81.37% Tandem now carries a market cap of just $67.35 Million

No question that of the three Dexcom is the worthiest and has the brightest future. Tandem is worthy only because it can’t get much worse and likely someone will come along to buy the company. As we noted earlier we would wait to see earnings before making any decision on Insulet.

Now to be clear here it will NOT be a straight path to higher values, there will be bumps in the road. Which when it comes to Dexcom anyway we would view as buying opportunities.

Listen we are not a stock jockey and don’t play one on TV but we do know a thing or two about the wacky world of diabetes devices.  Dexcom has the best CGM on the planet, CGM is the hottest thing going in diabetes and they are partnered with Google.

Tandem has the best insulin pump user interface on the planet plus they have something their competitors desperately want – an installed user base. Heck Medtronic (NYSE: MDT) could buy Tandem, convert the installed base to one of their systems, phase in the way cool user interface, own the Tandem pipeline which isn’t that bad and do so for next to nothing. This move would also hurt Animas, a unit of Johnson and Johnson (NYSE: JNJ), currently Medtronic’s closet competitor and hurt Dexcom too. Talk about a win-win scenario.

Insulet remains somewhat of a mystery as their cost of goods are still too high, they lack a sensor augmented system and the market continues to consolidate. The fact is no one will touch this company until they improve margins which means lowering manufacturing costs while increasing the installed base. The only way we see sales getting better is either putting more sales people on the street, a costly move which crimps margins. Or offer better deals which yep also crimps margins.

Of course, we could be dead wrong about all three companies. We just don’t think so.