NEW YORK (TheStreet) -- Shares of Covidien (COV) are up 14% so far on the year, while posting gains of almost 25% over the past six months. When going back a little further to its low of $44.52 in January 2012, this stock is up almost 50%.
Remarkably, no one's talking about it.
Even though I've always had a great deal of respect for the larger medical technology rivals including Johnson & Johnson (JNJ) and Abbott Laboratories (ABT), I've admired Covidien's growth and solid execution.
Regrettably, I've never had guts to buy the stock.Now that Covidien has taken off, I wonder how long management can sustain this level of performance while avoiding the inevitable trip-ups commonplace in this sector. After a solid first-quarter performance where Covidien beat on both the top and bottom lines, the company had even more dominant second-quarter results. For investors waiting to buy on a possible pullback, this isn't the quarter where that's likely to happen. In this sector, quarterly performance is measured by how well companies can grow organically, despite what the operational results may show. To that end, Covidien's 5% organic growth performance stands as one of the best among the med-tech companies that have reported thus far, including Johnson & Johnson and Abbott Labs.
By contrast, even though Johnson & Johnson just posted almost 9% revenue growth and is a dominant player in the med-tech space, concerns about the company's organic growth have emerged as a result of just 3% growth this recent quarter. JNJ is eight times the size of Covidien. Here too, Covidien's "nimbleness" introduces another attractive quality: JNJ is seen as being too big. When comparing Covidien to Abbott Labs, which is only twice the size of Covidien in terms of market cap, the story looks even better because Abbott posted only 2% revenue growth this quarter. Similarly, in the devices business -- which has seen a broad decline within the sector -- Covidien's 6% growth really stands out, albeit on an operational basis. By contrast, Abbott posted a 3% decline.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV