Today's smart dollar is chasing medical technology companies. The average cash return on capital invested in one of the 18 companies included in the U.S. Bancorp Piper Jaffray medical technology group, for instance, has been far above and beyond the cost of that capital. One way is by investing wisely in internal operations.
Internal investment is always a challenging task for companies.
Company executives face an array of appealing possibilities, any of which could be equally capable of producing either substantial benefits or disastrous consequences. Just as the companies themselves have difficulty determining appropriate internal investments, Wall Street analysts are challenged to determine how companies will invest and what returns will result. However, that task is becoming easier and more predictable for both medical companies and analysts alike. Medtech companies are starting to show signs of entering into an interesting internal investment cycle. The character of this cycle can be best understood by examining the individual segments of the cycle within its political and investor contexts.