Stock market meltdown? I’m following Warren Buffett’s golden rule

Without doubt, one of billionaire investor Warren Buffett’s most famous quotes is: “Be fearful when others are greedy and greedy when others are fearful“.

Yesterday (10 March), a lot of fear emerged in the US stock market. The Nasdaq Composite had its worst day since 2022, and is now down nearly 14% since December, pushing it deep into correction territory. Meanwhile, the S&P 500‘s slumped 8.7% in less than a month.

The sharp sell-off relates to President Trump’s on/off tariffs and US recession fears. We don’t know whether this is just turbulence or the start of a market meltdown.

Either way, I’m seeing high-quality stocks that were overpriced start to look attractive again. By following Buffett’s aforementioned golden rule , I think there could be some solid buys emerging for my portfolio.

One I’ve been waiting for…

During such scary periods… widespread fear is your friend as an investor, because it serves up bargain purchases.

Warren Buffett.

One position in my portfolio I’ve been wanting to add to for a good while is Intuitive Surgical (NASDAQ: ISRG). The company is a global leader in robotic systems used in minimally invasive surgery.

Its flagship da Vinci machine gives surgeons greater precision, enhanced dexterity, and improved control. This reduces the risk of complications compared to traditional surgery, generally leading to quicker recovery times and shorter hospital stays. A win-win all-round.

The stock’s been a monster success, soaring almost 800% over the past decade. However, it’s down nearly 21% since mid-January, potentially offering me the dip-buying opportunity I’ve been waiting for.

Massive installed base

Last year, Intuitive grew its installed base of da Vinci surgical systems to 9,902, a 15% increase over 2023. Full-year revenue grew 17% to $8.4bn, with 84% of that recurring from instruments, accessories, service contracts, and system leasing. Net profit jumped 29% to $2.3bn.

In Q4, worldwide da Vinci procedures increased 18%. However, management sees procedures increasing 13-16% this year, with the gross margin at 67-68% (down from 69%).

Tariff uncertainty

Now, there are risks here because a significant portion of Intuitive’s instruments are manufactured in Mexico. We have no idea what’s going on with the proposed US tariffs on Mexican products (details change daily). But management warns that they could have a “material impact” on margins.

In response, the firm might be forced to increase prices, which could impact growth. So this is something I’m keeping an eye on.

Meanwhile, at $482, the stock isn’t yet a bargain purchase, trading at 60 times this year’s forecast earnings.

My move

Due to ongoing market fear and the high valuation, I think the stock might slip a bit further from here. If it does, I’ll make my move, as Intuitive has a rock-solid moat built on market dominance, high switching costs, regulatory barriers, and recurring revenue.

It also spends heavily on research and development to stay ahead. In Q4, 174 out of 493 systems placed were the da Vinci 5. This next-generation machine features force feedback technology, allowing surgeons to feel the forces exerted on tissues during procedures.

Plus, with 10,000 times more computing power, they’re built to enable the future of artificial intelligence (AI) and machine learning in surgery. This state-of-the-art system could help power many more years of double-digit growth and I feel the stock is worth considering.

The post Stock market meltdown? I’m following Warren Buffett’s golden rule appeared first on The Motley Fool UK.

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Ben McPoland has positions in Intuitive Surgical. The Motley Fool UK has recommended Intuitive Surgical. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.