Medtech

• Marcel Fritsch
  Head Healthcare Funds & Mandates
  Bellevue Asset Management

• Valuations favour medtech: The sector looks unusually inexpensive relative to the broader US equity market. Medtech currently trades at a discount of around 5% to the S&P 500, despite benefiting from long-term structural growth and strong innovative capacity.
• Investor interest is returning: Medtech gained 2.3% in the third quarter of 2026, outperforming the Nasdaq 100, which rose 0.6%. Early signs of sector rotation are emerging.
• New applications are driving growth: Robotics, intelligent diabetes systems and AI-assisted diagnostics are opening up new treatment options.
• Focus on quality: Large-cap companies account for more than 97% of the Bellevue Medtech & Services portfolio. We expect our portfolio companies to deliver annual revenue growth of around 8% and earnings-per-share growth of around 13% through 2030.
• Acquisitions provide an additional boost: Strategic buyers are taking advantage of lower valuations.

Share prices have suffered, but operations remain strong

Medtech was among the weaker segments of the equity market in the first half of 2026. In our view, its share-price performance largely reflects a change in investor preferences. Enthusiasm for AI attracted substantial capital, partly at the expense of more defensive growth sectors such as medical technology.

Valuations have fallen accordingly. The sector trades at around 18 times expected earnings over the next twelve months. The comparison with the wider market is particularly striking: medtech now trades at a discount of around 5% to the S&P 500, whereas it has historically commanded a premium of roughly 15–20%.

The first signs of a recovery have emerged since early July. Investors are taking profits in technology stocks and rediscovering other sectors such as medtech. For a sustained turnaround, companies will need to back up their growth prospects with results. On this front, the outlook remains positive.

Revenue is growing. Earnings are growing faster.

Medtech combines resilient demand with attractive revenue and earnings growth. We expect the companies held by Bellevue Medtech & Services to achieve average annual revenue growth of around 8% through 2030. Earnings per share are projected to rise by around 13% a year. These figures illustrate the operating potential behind today’s lower valuations.

Our portfolio remains firmly focused on established companies: large caps account for more than 97% of holdings. Innovation, a strong market position and management’s ability to deliver on its announced targets remain decisive.

AI is expanding medtech’s possibilities

Alongside established growth markets, new applications are emerging across medical technology. Areas of particular interest include:

• Hypertension: Renal denervation aims to lower blood pressure by disrupting overactive nerves around the renal arteries. Broader reimbursement will be crucial to the market’s development.

• Sensors: Continuous monitoring sensors may eventually measure potassium as well as glucose, supporting the treatment of patients with kidney and cardiovascular disease.
• Imaging and robotics: New tracers and improved imaging could simplify diagnosis and clinical workflows. At the same time, greater competition in surgical robots and other established product categories is creating fresh growth momentum.

Reimbursement and demographics underpin demand

Alongside innovation, reimbursement is a key growth driver. Changes to the US health insurance system and investor concerns about growing competition from China have weighed on medtech recently. The latest quarterly results from medtech companies, hospital groups and US health insurers have eased concerns about the US healthcare landscape in particular. Funding for medical services and hospitals’ capital budgets nevertheless remain important factors.

Demographics provide a further tailwind. The first baby boomers turn 80 in 2026, reaching an age at which healthcare spending rises significantly. This is likely to increase procedure volumes in the years ahead.

Competition from China also warrants a more nuanced view. The success of Chinese companies in industries such as automotive cannot simply be extrapolated to medtech. Stringent regulatory requirements make it harder to enter major international markets, while government-driven pricing pressure weighs on suppliers in China’s domestic market.

Acquisitions highlight the sector’s appeal

Consolidation continues across the sector. Larger companies are acquiring technologies to expand their product ranges, as illustrated by Boston Scientific’s acquisition of Penumbra, Abbott’s acquisition of Exact Sciences and Danaher’s acquisition of Masimo. The prospect of a takeover alone, however, is not sufficient grounds for an investment. The quality of the underlying business remains paramount.

The US is our most important investment market. We see attractive opportunities among both large-cap companies and selected smaller specialists.

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Disclaimer
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