Report Card: Michael Weinstein

Michael Weinstein J.P. Morgan
	Report Card 1* Overall rank 1* Rank by institutions 23* Rank by stock picking Makes money for me Saves me from disaster Makes me think Tells the truth Meaningful service, not overkill Well-connected *Out of 26. Best star rating is 3 stars. Click here for our methodology.
1st Place Health Care Equipment and Supplies

Bio

B.S., Georgetown University. Weinstein joined J.P. Morgan in 1992 as a junior analyst covering steel. In 1995, he began tracking medical-technology devices. He focuses on the cardiovascular field, but he follows a wide range of therapeutic and diagnostic medical-technology companies.

Industry Outlook and Style

The Winners

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This industry is dominated by the likes of hospital suppliers Johnson & Johnson (JNJ Quote) and Abbott Laboratories (ABT Quote). But it also includes newer, faster-growing medical-device makers, otherwise known as medical technology or "medtech" players. Research on medtech companies is in great demand, and Weinstein follows that field closely.

Weinstein went so far as to make Novoste (NOVT Quote), a micro-cap medtech name with no earnings, his top pick of the past nine months. Novoste is an early stage company that has developed a new technology -- intracoronary radiation -- to keep arteries open after coronary angioplasty.

In the last phase of clinical trials, the system has received top ratings from physicians. Weinstein's survey of 115 cardiologists last spring "pointed to the likelihood that Novoste's technology would be adopted faster than the Street is expecting, which supported our view," he says.

Between year-end 1999 and late July of this year, Novoste skyrocketed 287%, from 15 to 58. (The next-best performer in the group, Medtronic (MDT Quote), rose only 50%.) Despite that run-up, Weinstein still gives his highest rating, a buy, to the stock -- in anticipation of Food and Drug Administration approval in mid-September, the new technology's launch and a potential buyout offer.

Among the large-caps, Weinstein regards turnaround story Baxter International (BAX Quote) as the best opportunity. In the past half-dozen years, he points out, slower-than-historical growth and a series of earnings disappointments have caused the stock to lag behind the group.

Weinstein cites two reasons for believing that Baxter's earnings will pick up substantially. The first is the Morgan-led spinoff on March 31 of Baxter's cardiovascular division (now a separate company called Edwards Lifesciences)(EW Quote).

This restructuring allows the company to concentrate on its higher-growth renal, intravenous and biosciences businesses. Second, he highlights Baxter's pending application to the FDA to receive a license for a second manufacturing suite at the California facility where it produces recombinant antihemophilic factor, a genetically engineered blood-clotting factor for treating hemophilia.

Weinstein expects Baxter's earnings to exceed expectations over the next 18 months: He projects earnings of $3.09 for this year (compared with an I/B/E/S consensus of $3.06) and $3.55 for 2001 (compared with a $3.52 consensus).

Weinstein, who is praised by voters in TheStreet.com's Analyst Rankings -- Equity 2000 survey for his "great information," "timely comments" and "strong stock picking" -- believes that the bulk of the industry's growth will continue to come from device manufacturers. "The medtech group is currently at an important juncture, where the first wave of technology -- implantable cardiac defibrillators and coronary stents -- is coming to an end," he says. "The second wave -- devices for congestive heart failure, peripheral stents and intracoronary radiation, to cite a few examples -- is beginning to develop."

While ICDs continue to post strong growth, he acknowledges, the well-penetrated stent market has seen earnings growth drop from double and triple digits to the low single digits.

Hence, Weinstein believes that the industry will be propelled over the next five years by this host of newly emerging technologies and by new applications for existing devices. He says that medtech leaders Guidant (GDT Quote) and Medtronic will remain vibrant growers in the coming year, as these various technologies start to come to market. "Investors positioning their portfolios for 2001 should be opportunistically accumulating these two stocks," Weinstein suggests.

Stock Pick

Favorite stock for next 12 months:
Baxter International
Comment:
"As Baxter's earnings growth accelerates at the same time that S&P earnings growth decelerates, we think that growth investors will begin buying Baxter," predicts Weinstein. "That should aid in driving up the multiple and the stock price to new highs. We think the stock could reach 90 by year-end."


Rate Their Stock Picks:

Which stock do you like best? Weinstein and Malone: Baxter International Reicin: Abbott Labs