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Baby Boomers Aching for Zimmer Holdings

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At around 17 times forward earnings Zimmer Holdings is significantly cheaper than its closest rival Stryker, which currently trades around 23 times forward earnings.

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"Looking out at the road rushing under my wheels
Looking back at the years gone by like so many summer fields
In sixty-five I was seventeen and running up one-o-one
I don't know where I'm running now, I'm just running on."
-Running on Empty (Jackson Browne)



Another one of my first albums: I thought Browne was one of the coolest rockers going and in later years his relationship with Daryl Hannah did nothing to diminish his stature, let me tell ya. But here's a bit of a wake up call - this October 9, Jackson Browne will be turning 59. Don't think Jackson is going to be running anywhere these days, maybe a brisk walk, as those years of touring take its toll on the old joints (not that I would know - Charlie Mangano told me!)

But, Jackson, fear not! Solutions for overworked knees and hips are everywhere these days, and you need look no further than Zimmer Holdings (ZMH).

ZMH, in my opinion, is one of the best pure baby boomer plays out there. According to its website, "Zimmer is a worldwide leader in joint replacement solutions for knee pain and hip pain, and provides comprehensive spine care solutions for acute and chronic back pain".

If this isn't every rocker's dream stock I don't know what is! And from July 2006 this was also a dream stock for "the Street", trading up from a low of $54.50 to a 52-week high in April of $94.38 - a rally of about 73%.

But first and second quarter earnings left investors with that "What have you done for me lately?" feeling and the stock has retreated by about 18% off the highs. A negative Barron's piece on August 2 did nothing to inspire the investment community either, citing difficult comps and concern about the upcoming presidential elections for its pessimism.

But I am not ready to throw in the towel just yet. I still think the story at Zimmer Holdings is rather compelling. At around 17 times forward earnings it is significantly cheaper than its closest rival Stryker (SYK) which currently trades around 23 times forward earnings. By the time you read this, Zimmer will have already presented at the Thomas Weisel Healthcare Conference in Boston and is scheduled to speak at a Bank of America Investment Conference in San Francisco on September 18.

The overall market feels a bit "squishy" up here (yes, that is a financial term) and after an 800 point rally off the lows, the Dow Jones is due for a breather.

But Zimmer Holdings deserves to be on your radar screen - it still looks like it has a little room on the downside, so patience is a virtue, but in terms of catalysts other than the aforementioned conferences, look for 3Q earnings on or about October 25 or whenever Keith Richards goes in for a hip replacement (Heaven forbid), whichever comes first!
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No positions in stocks mentioned.

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