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Surgery's Never Been So Cheap

Monday on Mad Money, Cramer highlighted stocks he thought were the best way to play the recovery from Friday’s massive 366-point drop in the Dow. He found two companies that not only survived but also thrived and could be had on the cheap. Google looked good for its growth and long-term outlook, but Intuitive Surgical might be even better.

While the rest of the market dropped significantly on Friday, Intuitive Surgical’s share price actually went up, thanks to a stellar earnings report the day before. The healthcare tech company more than doubled its profits for the third quarter and raised its revenue outlook for 2007.

Cramer’s been behind ISRG since 2005, and just since July 19 of this year the stock is up 88%. Cramer is expecting even more growth in the future on the strength of its innovative surgical tool da Vinci, and not for the reason most would think.

It’s true that da Vinci is a groundbreaking surgical robot that allows for less invasive procedures. And that means patients are out of the hospital faster, saving both the patient and the insurance company money. Cost containment in healthcare is one of the best multiyear themes around, Cramer said, and ISRG taps right into it.

Even still, Cramer thinks it’s Intuitive Surgical’s adaptation of Gillette’s razor/razor blade sales system that will fuel this company’s profits. Sales of the da Vinci may top out, but the disposable parts that are needed for each procedure should keep the company printing money, Cramer said. Forty-five percent of the revenue reported last Thursday was recurring thanks to these parts, and the margins on them are higher than on the machine itself.

Investors interested in growth can also look to the Intuitive Surgical’s projections that there will be 65% more prostatectomies and 175% more hysterectomies to be done by the end of 2007. Then there’s also ISRG’s move overseas. Last quarter the company placed 17 systems internationally, which was an 89% increased over the same quarter in 2006.

And like Google , ISRG is an inexpensive stock hiding behind what looks like a high share price. The stock is trading at 59 times next year’s earnings on about 40% growth. Cramer said growth money managers would be willing to pay a 75 multiple for a comparable company. That puts ISRG at $358 a share and not the $280 it’s at now.

So don’t be scared away, Cramer said. Intuitive Surgical is a great way to ride the market’s climb back to 14,000.

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

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