Bellevue Medtech & Services

Stocks advanced +4.1% in the month under review despite the government shutdown in the US. October marked the start of the Q3 reporting season, and positive earnings announcements in the healthcare space reawakened investor interest in these stocks, which gained +5.2% over the month and beat the broader equity market. The medtech sector (+3.3%) did not gain quite as much ground, while the Bellevue Medtech & Services Fund (+3.6%) closed +0.3% higher than its benchmark.

Many medtech companies have surprised to the upside so far this reporting season, and procedure growth has generally been very good. Intuitive Surgical (+21.9%) is a case in point. It published a very strong set of Q3 results, with surgical procedures up 19%, more than the 16%–17% consensus forecast, and margins clearly higher (gross margin +3%, EBIT margin +4.5%). Management consequently raised its full-year guidance for procedure growth sharply higher.

Hoya (+19.8%) and EssilorLuxottica (+15.0%) were also performance drivers. Hoya reported good quarterly results, slightly better than expected, and issued a positive medium-term outlook for its hard disk drive (HDD) business. Strong quarterly results from other players in the HDD supply chain are another indication of growing demand. EssilorLuxottica achieved double-digit quarterly sales growth of 11.7% in Q3, for the first time ever in its current form. Growth was mainly driven by smart glasses, which accounted for almost 5% of the reported growth rate. Management also made very positive remarks about business during the early weeks of Q4, when sales actually picked up versus Q3. EssilorLuxottica is also scaling up production capacity for smart eyewear: the targeted 10 million units of annual production capacity could be in place by the end of 2025, much sooner than the initial target of year-end 2026. Dental technology players Straumann (+19.9%) and Align (+12.3%) were able to sooth investor worries about Q3 earnings. Straumann's quarterly results met expectations, and its full-year guidance was not lowered, contrary to investor worries. A decline in order activity in China ahead of the second stage of the Chinese government’s new procurement policy led to an anticipated drop in sales growth in the APAC region, but sales in all other geographies were better than expected, especially in North America. Align’s results topped analyst estimates. Volume growth was stronger than expected at 4.9%, and management raised its full-year guidance for clear aligner volume growth to the mid-single-digit range (from low single digits).

Dexcom (-11.7%) beat analyst expectations but failed to meet the expectations of the broader investment community. After several sequentially strong quarters in 2025, new patient numbers for Q3 did not set a new record high, and although management did revise its sales guidance for 2025 slightly higher, its 2026 guidance of 11%–13% growth clearly undershot the previous consensus expectation of 15%. That said, the company’s sales target for 2026 could be overly conservative in order to give the new CEO Jack Leach a smoother start. Penumbra (-8.4%) released good clinical data at the TCT conference, but investors were more worried about weak Q3 results. Penumbra will publish its Q3 results in November. Medtronic (-2.8%) and Masimo (-2.7%) also detracted from performance, as did healthcare services providers Cigna (-13.5%) and Molina (-18.4%). Cigna’s 2026 EPS guidance disappointed shareholders. Management said that prices in its pharmacy benefit management business had to be lowered to secure contract renewals and that major investment projects were in the pipeline. Investors were underwhelmed by Molina’s weak Q3 results and viewed management’s 2026 EPS guidance as overly optimistic after several competitors said they were expecting lower prices next year, a trend that was not mentioned by Molina.

Judging by the initial pleasing Q3 results published by medtech companies and by our talks with numerous company executives, the solid volume growth in surgical procedures should be sustained throughout Q4. We also expect very positive developments in 2026. The currently record-high valuation discount vs Wall Street is an additional argument for investing in the Bellevue Medtech & Services (Lux) Fund. Furthermore, there are already signs that M&A activity is gaining momentum and that large-cap companies are using their strong balance sheets to fund additional acquisition-led growth. The most important factor for success over the long run is the approval and subsequent launch of relevant new products that generate high sales growth. Examples here are Abbott’s Lingo, Libre Rio, Libre 3, TriClip, and AVEIR products, Boston Scientific’s Farapulse PFA system and Watchman FLX Pro device, and the new da Vinci 5 surgical robot from Intuitive Surgical.