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Investing can be complicated, but the companies behind those investments don't have to be. As an investor, knowing exactly how the investments you own make their money certainly helps you sleep better at night, particularly when the market is moving against you.
With that in mind, we asked three of our contributors to point out companies with publicly traded stocks that were straightforward to understand. They picked Intuitive Surgical (NASDAQ: ISRG), Nike (NYSE: NKE), and Public Storage (NYSE: PSA).
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Complex technology, simple business
Keith Speights (Intuitive Surgical): You might think that the stock of a company that makes robotic surgical systems would be anything but easy to understand. But that's not the case at all for Intuitive Surgical. While its technology is complex, the company's business is quite straightforward.
Intuitive Surgical sells its da Vinci robotic surgical systems to hospitals and other healthcare providers across the world. These systems consist of a robotic arm with specialized surgical instruments and cameras with a control center several feet away that surgeons use to control the robotic arm and instruments. It's complicated, for sure.
But Intuitive Surgical basically uses the old razor-and-blades business model. The company makes money on the sale of da Vinci systems, but the big bucks are made on supplying replacement instruments, accessories, and services. Last year, 71% of Intuitive's total revenue came from these recurring sources -- and the percentage is increasing.
Intuitive Surgical's growth opportunities are also easy to understand. As populations across the world age, more surgeries are required -- notably including the types of surgery where da Vinci is most widely used. Intuitive also continues to explore ways to use robotic surgery for additional types of procedures. Put all this together and it means that Intuitive Surgical's momentum seems unstoppable with more systems sold and higher recurring revenue. Pretty simple.
A pace-setting consumer goods company
Todd Campbell (Nike): Nike markets a premium brand to a loyal customer base and, importantly, its products regularly need replacing. That's a simple, winning recipe, especially since global population growth means a bigger addressable market.
Nike's an intriguing stock to buy right now. U.S. sales growth and gross margin have been negatively impacted by industrywide inventory imbalances and price cuts, but those headwinds may be ending.
In fiscal Q1 2019, U.S. sales grew 6% year over year, up from 3% year over year in fiscal Q4. That growth, plus double-digit international growth, including a 24% year-over-year jump in China, resulted in companywide sales increasing 10% in the past year.