Bellevue Medtech & Services (CH)

The US labor market data released in February exceeded investor expectations, while core inflation remained in line with forecasts. The minutes of the Federal Open Market Committee (FOMC) indicate that further rate cuts remain possible if inflation continues to decline, although the central bank is likely to pause for the time being.

The broad equity market gained 0.3%. The broad healthcare sector advanced 2.5%, driven by biopharma and healthcare services, which delivered the largest positive performance contributions. The Bellevue Medtech & Services Fund (+0.4%) also advanced but underperformed its benchmark (+0.9%). Medtech companies detracted -0.6% from performance, while healthcare services contributed 1.0% to performance.

Tenet Healthcare (+26.0%), McKesson (+18.3%) and HCA Healthcare (+8.0%) contributed positively to performance, while Veeva Systems (-11.1%) detracted. Tenet and McKesson exceeded earnings expectations and raised their guidance. Veeva’s share price decline was primarily driven by AI-related disruption concerns in the software sector rather than weaker fundamentals. High regulatory barriers in healthcare are likely to limit potential disruption.

Health insurers such as CVS Health (+6.8%), Cigna (+3.5%), Centene (+3.2%) and UnitedHealth (+1.8%) made positive contributions to performance, while Molina (-14.6%) and Elevance (-7.8%) detracted. Performance was influenced in part by quarterly earnings releases. CVS, Cigna and Centene reported better-than-expected fourth-quarter earnings and issued 2026 earnings guidance in line with or above expectations. All three companies expect lower medical cost ratios as a percentage of premiums in 2026. Molina, by contrast, disappointed with significantly lower fourth-quarter earnings, and its 2026 earnings outlook also fell short of expectations. Investor sentiment improved due to the defensive characteristics of health insurers and slightly better visibility regarding the final Medicare Advantage reimbursement rates for 2027, which we expect to be announced in early April.

Medtech stocks such as Becton Dickinson (+7.9%), Hoya (+7.7%), Alcon (+7.1%), Abbott (+6.0%), Edwards Lifesciences (+5.9%) and Stryker (+4.4%) contributed positively to performance. Becton Dickinson reported better-than-expected quarterly results and completed the spin-off of its Biosciences & Diagnostic Solutions business combined with Waters. Edwards Lifesciences exceeded revenue expectations, supported by strong performance in its transcatheter aortic valve business.

Boston Scientific (-18.2%), EssilorLuxottica (-13.4%) and Medtronic (-5.5%) weighed on performance. Although Boston Scientific exceeded revenue expectations, growth in Watchman and pulsed field ablation fell short of investors’ elevated expectations. The 2026 guidance of +10.5% organic revenue growth was in line with expectations; nevertheless, the stock corrected disproportionately. EssilorLuxottica reported fourth-quarter revenue growth of +18.4%, primarily driven by demand for AI glasses. However, the share price declined significantly after Apple announced plans to launch its own AI glasses in 2027.

Life science tools companies Thermo Fisher (-10.3%) and Danaher (-4.2%) also detracted from performance. Investors are concerned that biopharma companies may increasingly internalize clinical research activities in response to AI-related disruption, which we consider unlikely.

All performance data in CHF/AA shares.

Within healthcare services, we see significant upside potential in hospital operators and US health insurers. Hospitals should benefit from strong procedure volumes and only moderately rising personnel costs. For health insurers, we expect margin recovery in 2026, particularly in Medicare Advantage. Persistently high interest rates could provide an additional tailwind to earnings.

Based on Q4 reports from medtech companies and our discussions with numerous management teams in January and February, we expect robust growth in procedure volumes in 2026. Operating leverage from higher volumes, the weaker US dollar and the annualization of new tariffs should further accelerate earnings growth.

The approval and launch of key new products should further support revenue growth in the medtech sector and underpin valuations. Examples include Abbott’s Volt PFA catheter, Boston Scientific’s Farapulse PFA and Watchman FLX Pro, the robotic surgical systems 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 publications and new reimbursement decisions should not only strengthen investor confidence but also increase revenues over the medium term.