Bellevue Medtech & Services (CH)

The US economy remained resilient in May despite the conflict in the Middle East. A stronger-than-expected labor market and surprisingly robust consumer confidence supported economic activity, while core inflation developed broadly in line with expectations.

The broad equity market gained 4.4% during the reporting month. Performance was driven primarily by the information technology sector. In particular, semiconductor and hardware manufacturers benefited from the AI boom and accounted for the majority of the market’s positive performance. The healthcare sector advanced 1.8%, with pharmaceutical companies, life science tools providers and healthcare services companies making the largest positive contributions. The Bellevue Medtech & Services Fund declined 2.2%, underperforming its benchmark, which fell 1.8%. While medtech companies detracted 2.8% from performance, healthcare services companies contributed a positive 0.6%.

Veeva Systems (+11.6%) contributed positively to portfolio performance, while HCA Healthcare (-13.0%) and McKesson (-9.1%) weighed on returns. Veeva advanced in May after securing two additional major pharmaceutical companies, Merck KGaA and Teva, for its Vault CRM platform. HCA, on the other hand, declined significantly after reporting weaker-than-expected quarterly earnings in April, while management teams at health insurers (see below) expressed a very optimistic view regarding medical cost trends in April.

Health insurers such as Humana (+29.0%), Centene (+10.9%), CVS Health (+9.1%), Elevance (+4.3%) and UnitedHealth (+2.5%) made positive contributions to performance, while Cigna (-4.7%) detracted. US health insurers posted strong share price gains in May after UnitedHealth management confirmed, based on April data, that medical costs remained well under control. In addition, the company expressed confidence in its ability to gradually improve profitability, particularly within its Medicare and Medicaid businesses, over the coming years.

Medtech companies such as Dexcom (+23.7%), LivaNova (+22.6%) and Edwards Lifesciences (+3.4%) contributed positively to both absolute and relative performance. Dexcom gained significant value following a well-received Investor Day. Positive drivers included compelling long-term growth and margin targets, the involvement of activist investor Elliott, and an expansion of the share repurchase program. LivaNova also performed well. The company exceeded expectations with its first-quarter results and raised its full-year revenue and earnings guidance.

Large-cap, innovative and fast-growing medtech companies such as Boston Scientific (-16.3%), Medtronic (-9.0%), Intuitive Surgical (-7.3%) and Abbott (-5.8%) weighed on performance. Boston Scientific came under pressure after lowering its near-term expectations for its WATCHMAN business in the US. The reason was continued weakness in standalone WATCHMAN procedures, which management attributed to capacity constraints as well as changing referral patterns among electrophysiologists and interventional cardiologists. Following Boston Scientific’s weakness, other medtech stocks also came under pressure.

Life science tools companies Thermo Fisher (+2.7%) and Danaher (+1.9%) contributed positively to performance. Thermo Fisher advanced after management reaffirmed its 2026 guidance at its Investor Day and expressed a more constructive outlook for its pharma/biotech and CDMO businesses.

All performance data in CHF / AA shares.

Within healthcare services, we see significant value creation potential in hospitals and US health insurers. Hospitals should benefit from persistently strong treatment volumes and moderately rising labor costs. For health insurers, we expect a margin recovery in 2026 and 2027, particularly within the Medicare Advantage and Medicaid segments. Continued elevated interest rates could provide additional support to earnings growth.

Based on Q1 reports from medtech companies and our discussions with numerous management teams over recent weeks, we expect robust procedure volume growth in 2026. Operating leverage from solid procedure volumes, a weaker US dollar and the annualization of the new tariffs should support stable earnings growth.

The approval and launch of important new products should continue to support revenue growth in the medtech sector and help stabilize valuations. Examples include Abbott’s Volt PFA catheter and Boston Scientific’s Farapulse system, the robotic platforms da Vinci 5 from Intuitive Surgical, Hugo from Medtronic and Ottava from Johnson & Johnson, as well as Medtronic’s Symplicity Spyral catheter. Numerous clinical data readouts and new reimbursement policies should not only strengthen investor confidence but also support revenue growth over the medium term.