If you're a 40-year-old investor, you're probably not planning on retiring for another 20 years or more. While that may be a bit of a downer for those looking forward to the freedom that retirement can bring, the positive is that it gives you more than two decades to grow your investments as you prepare for the big day.
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This ultra-long-term investment horizon can be a major advantage for you over other investors -- if you use it wisely. One of the best ways to do so is to seek out stocks with growth opportunities that span across many years -- and even better, those that are fueled by major secular trends.
Fortunately, we can invest in one such business today. Read on to learn more about it.
As the leader in robotic surgery, Intuitive Surgical (NASDAQ: ISRG) is well positioned to profit from a powerful megatrend: the aging of the world's population.
In the U.S. alone, the Census Bureau projects that the number of people aged 65 and older will rise from 48 million to 88 million over the next three decades. On a global basis, the 65-and-over population is expected to more than double to 1.6 billion by 2050.
This global trend benefits Intuitive Surgical for the simple reason that older people tend to require more medical procedures. The American College of Surgeons agrees, saying, "The aging of the population will lead to a significant increase in the demand for surgical services." Additionally, the percentage of surgical procedures using robotic assistance is rising. Thus, Intuitive Surgical is poised to grow its share of a large and expanding market.
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Strong international growth prospects
In addition to these demographic trends, Intuitive Surgical's growth should also be boosted as it expands internationally.
About 65% of Intuitive's installed base of da Vinci surgical systems are located in the U.S., with major markets such as Europe and Asia currently accounting for only 17% and 13%, respectively. Yet system placements during the first half of 2017 jumped 37% in markets outside the U.S. (OUS), compared to 18% domestically. Moreover, OUS procedures grew 25%, versus 14% in the United States.
With more than 95% of the world's population living outside of the U.S., international markets represent a massive long-term term growth opportunity for Intuitive Surgical.
A wide moat
All of this growth potential will be for naught, however, if Intuitive can't keep its competition at bay. But thanks to its strong competitive advantages, that's unlikely to be the case.
With more than 4,100 da Vinci Surgical Systems in use throughout the world -- and over 4 million procedures performed to date -- surgeons have logged countless hours working with Intuitive's machines. This helps to strengthen Intuitive's competitive moat by increasing its customers' switching costs. The large amount of time and capital doctors and hospitals have invested to become proficient with these robotic systems makes it difficult for them to switch to a competing product.
Intuitive's massive installed base of da Vinci systems also provides a predictable and steadily growing stream of high-margin revenue, which Intuitive uses to fund its research and development program and further fuel its growth. In all, 71% of Intuitive's revenue -- or $1.9 billion -- was of the recurring variety in 2016, up from 70%, or $1.7 billion, in 2015. These figures should continue to rise in the coming years, as Intuitive grows its installed base of robotic systems and the number of ways in which its machines can be used.
How to use time to your advantage
With shares surging more than 70% so far this year, Intuitive's stock now trades at about 39 times analysts' estimates for 2018. That's a rather steep price to pay for a business that's projected to increase its earnings per share at slightly more than 11% annually over the next half-decade. But if you're in your 40s, you can take advantage of your long-term investment time horizon by buying an initial starter position in Intuitive today, and then look to add to it at better value points in the future. In this way, sell-offs in the stock can be used as buying opportunities that allow you to build a position in this outstanding business at even better prices over time. By doing so, you'll position yourself to profit handsomely from the potential multidecade growth of the global robotic surgery market.
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