The company enjoyed a re-rating as its margin targets looked ever more achievable and concerns about the cyclicality of its US business receded. As a result the stock rose to the target price and was sold, as there was no reason to revise forecasts up further.
Smith & Nephew develops, manufactures and supplies replacement hips and knees, amongst other orthopaedic devices. Growth is driven by demographics (ageing baby-boomers), obesity and sports injuries, as well as product innovation. The industry is particularly defensive, with few competitors and a loyal customer base. Share prices have been hit by regulation in the wake of anti-competitive pricing and sales practices. The company should benefit in the fall-out, as the bigger players in the US lose a modicum of their market share. Cost-cutting measures, including relocation of some production to lower-cost regions, will bolster margins in the meantime.
| Sedol |
Type |
Price |
Date |
| 0922320 |
Sell |
£ 5.599 |
21/09/2009 |
| 0922320 |
Buy |
£ 4.875 |
20/01/2009 | |
