Bellevue Medtech & Services (CH)

July was marked by the renewed conflict in the Middle East, which pushed interest rates higher through rising crude oil prices and higher inflation expectations. At the same time, key US economic data for June was softer: Core inflation came in slightly below expectations and the jobs market was also weaker than expected.>

The broad equity market gained 0.2% in the month under review. As in the previous month, the information technology sector weighed on performance. The large US technology companies are taking on substantial new debt to finance their AI investments, which is raising increasing doubts among investors. The healthcare sector advanced 1.5%, driven by medtech, life science tools and healthcare services providers. The Bellevue Medtech & Services fund gained 3.6% and slightly outperformed its benchmark (+3.5%). Medtech companies contributed +2.4% to performance and healthcare services providers +1.2%.

Tenet Healthcare (+36.2%), Veeva Systems (+14.9%) and McKesson (+13.3%) made positive contributions to performance. Tenet benefited from quarterly results that were well above expectations and an upgraded outlook for 2026. Veeva gained following the acquisition of Copli and the launch of the Falcon MLR AI solution, which highlighted the potential for stronger AI-based monetization of its product portfolio.

US health insurers delivered mixed performance. CVS Health (+1.6%) and Cigna (+1.2%) made positive contributions to performance, while Humana (-8.4%), Centene (-3.0%), Elevance (-2.8%) and UnitedHealth (-0.3%) detracted. All insurers except CVS reported quarterly results in July. Despite mostly better results, share price reactions were muted or negative given high investor expectations. Earnings per share mostly exceeded expectations, while medical loss ratios (MLR) were better thanks to higher premiums, favorable cost trends and positive reserve effects. Several insurers subsequently raised their earnings guidance for 2026. Profitability in Medicare Advantage is improving, while the commercial business and Obamacare performed well thanks to pricing adjustments and risk adjustment. Medicaid remains the most challenging segment due to high medical costs.

In contrast to US health insurers, expectations in the medtech sector were more moderate. Concerns that the expiration of Obamacare subsidies could weigh on procedure volumes did not materialize. At the same time, the hospital investment environment remains robust. Innovative large-cap companies such as Dexcom (+23.9%), Abbott (+17.3%), Boston Scientific (+9.5%) and Medtronic (+9.2%) made substantial contributions to performance. Dexcom exceeded sales and earnings expectations, raised its full-year guidance and reported record new patient numbers as well as improving profitability. Abbott reported good quarterly results and a strong outlook for H2 2026 and 2027, driven by accelerating sales growth and numerous product launches. Boston Scientific, by contrast, lowered its outlook for 2026 and 2027 again, but thereby established a more realistic expectation base and made the low valuation more attractive. Intuitive Surgical (-11.1%), Edwards Lifesciences (-4.8%) and Hoya (-2.9%) detracted from performance. Intuitive and Edwards exceeded expectations with their Q2 2026 results. Intuitive, however, was penalized for slowing procedure growth in the US and for not raising its full-year guidance, which had already been priced in. Edwards initially reacted positively to the results but was affected by profit taking toward the end of the month.

Life science tools company Thermo Fisher (+14.6%) reported excellent results.

All performance data in CHF/AA shares.

In the healthcare services space, we see considerable upside potential for hospital operators and US health insurers. Hospitals should benefit from consistently high patient volumes and moderately rising personnel costs. We expect health insurer margins to recover in 2027 and 2028, particularly in Medicare Advantage and Medicaid. Continued high market interest rates could provide additional support for earnings growth.

Based on the Q2 reports from medtech companies and our discussions with numerous management teams, we expect robust growth in procedure volumes in 2026. Economies of scale and refunds of US tariffs should also support solid earnings growth.

The approval and launch of major new products should continue to support sales growth in the medtech sector and stabilize valuations. Examples include Abbott’s Volt PFA catheter, Medtronic’s Affera and Boston Scientific’s Farapulse, the da Vinci 5 robotic system 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 rules should not only strengthen investor confidence but also increase sales over the medium term.