For medtech analyst Michael Jungling investor days are just the tip of the iceberg.

As a healthcare analyst, he says, it is difficult to differentiate yourself unless you are prepared to do a lot of independent field checks.

His most valuable time is spent in hospitals meeting with doctors who will be working with the medical devices or experts on healthcare reform.

“Field checks can help you see if doctors like a product, whether there are potential problems training surgeons to use it and how quickly it is being adopted. You can see where a product may be heading weeks or months ahead of the quarterly results,” says Jungling.

It seems to work: Jungling is the top-rated equity analyst in the medtech sector and fourth overall in this year’s pan-European Thomson Extel Survey.

Management meetings
So where do company meetings fit in? Jungling says meetings with management help analysts to work out the valuation of a company based on the strategic direction set out by the board and senior executives.

Typically when he does a discounted cash flow valuation, 60 to 80 per cent of the value of a company may be after the seventh or eighth year, so it’s the investments in the next two to three years that affect the valuation.

Finding out if management is keen to move into new areas and is thinking about acquisitions and, if so, what the acquisition criteria might be is very useful, says Jungling.

“It gives you a sense of whether a company might be willing to overpay to be part of a new area,” he says.

“It also gives you food for though about how a company might look in three to five years time. Those kind of comments can materially affect the share price today.”

Product launches are another good time to sit down with IR and management, says Jungling, so you can see how many sales people they intend to hire for this new product, how many surgeons they are willing to train, and whether it will open doors to accounts and cross-selling opportunities.

Then it is a question of assessing whether the launch is likely to be better or worse than the company expects, based on information collected in field checks.

It also comes down to the reliability and track record of management and the IR team, says Jungling.

“Have they been accurate in the past when it comes to product cycles? Have they got a history of disappointing? That gives you an indication of how far you can rely on the company’s statements,” he says.

Feedback
Jungling admits that if his research is not that positive about a company, it can lead to communication breakdown.

“Merrill Lynch has a reputation for being clear when we don’t like certain things about a company. Some take advantage of that openness, even though they may disagree; others take it personally and are not willing to listen to what you have to say, which is a shame,” he says.

“Every company can call me up if they feel they want to and I’ll tell them what I really think about issues.”

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