Chasing Value™: Tale of Two Tech Stocks (ISRG and SCON)

As the tech bubble was building, I took an interest in both companies for their unique products. Superconductor Technologies, like Intuitive Surgical, was working in what I thought was a strong market and had a lot of potential to grow. The telecommunications industry was booming, wireless was booming, and Lucent, now Alcatel-Lucent ADS (ALU), was booming more than most as the apparent pix and shovels guys of the dot-com era.

Superconductor, back then, as now, had a product that was useful to AT&T (T), Verizon (VZ) and others that improves the efficiency of wireless transmission. However, the product cost a lot more than the traditional technology. It seems that back then, as is the case now, the price points of the product were always just outside what would make it the go to choice in many cases.

The company was also hurt by the burst of the tech bubble, consolidation of the industry and as AT&T's questionable service underscores, geographic expansion has taken precedence over transmission quality. Maybe that will change. Maybe that should change. However, the stock that I bought around $4.00 a share went up and down and I got out for a small loss many years ago.

Yesterday SCON closed at $1.55 after touching a 52-week low of 1.52 during the trading day. Superconductor Technologies announced a $4M share secondary offering priced at $1.50, diluting the stock, and received a neutral rating, and perhaps that is generous.

On the other hand Intuitive Surgical was upgraded to outperform from market perform at Wells Fargo (WFC). Wells Fargo increased the valuation range with a target of $340 to $360, giving it credit for plenty of market penetration yet to be fulfilled. ISRG closed yesterday at $267.96, a 31.8% drop from its all-time high of $393.92 reached earlier this year.

This is a good example of riding the winners and dumping the losers. I did sell a little ISRG at $358 per share (very little), but this was for diversification. Long term, I think the company remains a powerful cash cow.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value™ and Serious Money. Disclosure: He owns shares of ISRG.