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Friday, July 8th, 2011

Yesterday’s posting on real estate got me thinking about stocks of companies in the vicinity and the first one I looked at was Medtronic (MDT), shown above.  It’s yet another example of a big-cap name that’s spent more than a decade trying to grow into a valuation that was wildly optimistic.

Although there are concerns about the prevalence of such lofty expectations today, you find them only here and there now, not almost everywhere as was the case back then.  As a result, the modest 18% return to Medtronic shareholders during the period shown was actually a smidgen more than that received by a holder of the S&P 500.

But the business has kept moving along, as shown by the growth in sales and earnings.  It has gone from being an aggressive growth stock to being a value one.  It continues to be a dominant force in several medical device categories.

One interesting side note is that the firm went from having a reputation for ethical leadership (as typified by Bill George, the former CEO who has made a name for himself in that area) to appearing to be just another medical company with questionable practices.

It’s an interesting case study:  A solid business that’s been out of favor for a long time.  What, if anything, can return it to heart-pumping glory?  (Chart:  Bloomberg terminal.)