Utah Medical Products: Niche Device Maker with Disciplinary Moat

Jonathan Isaac of Quilt Investment Management presented his in-depth thesis on Utah Medical Products (US: UTMD) at Wide-Moat Investing Summit 2019.

Read a related article by Jonathan on disciplinary moats.

Thesis summary:

Utah Medical Products creates niche, differentiated medical devices and products geared towards newborns and women. The site of engagement with UTMD’s products is a regulated, rigid space defined by clinical inertia towards a relatively stable base of end-users. In such a situation, UTMD’s moat approaches a “disciplinary moat,” or a site-specific chain of routines with sleepwalking-type economics. Jonathan stages Buffett’s statements about business quality and competitive advantage as the premier examples of how a disciplinary moat appears in financial statements. Through Jonathan’s interpretation of these statements, the qualities of a disciplinary moat in UTMD’s low operating standard deviation are evident — persistently high ROIC and an ability to obtain an attractive return on retained earnings over time. Such qualities are also evident in UTMD’s ability to grow owner earnings favorably compared to changes in a relevant net asset base.

Disclaimer/Disclosure: Accounts managed by Quilt Investment Management, LLC currently own shares of UTMD, and may transact in the shares without future updates. UTMD has a relatively low market capitalization and relatively low average daily trading volume, and shares sometimes quote at a wide bid/ask spread. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of specific securities, investments, or investment strategies. Additionally, the information should not be construed as Quilt Investment Management, LLC’s solicitation to effect the rendering of personalized investment advice for compensation, over the internet or otherwise. This is not a research report and/or a recommendation. Investments involve risk and, unless stated otherwise, are not guaranteed. Always be sure to first consult with a qualified financial adviser and/or a tax professional before investing, and to verify any information deemed to be accurate. Past performance is not indicative of future performance. 

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About the instructor:

Jonathan Isaac is President and Portfolio Manager of Quilt Investment Management, LLC, a registered investment adviser in Portland, Oregon. Jonathan’s recent writings incorporate the work of Warren Buffett, alongside philosophers such as Michel Foucault and Gilles Deleuze, in order to analyze the shifting delineations of competitive advantage throughout time. Jonathan is a graduate of Grinnell College.