Bellevue Medtech & Services

Global stocks (MSCI World Net Index +0.2%) and European stocks (Euro Stoxx 50 +0.6%) closed slightly higher in August. Healthcare stocks (MSCI World Health Care Net Index +2.6%) delivered a clearly better performance, thanks in no small measure to US health insurers, which recovered most of the ground they had lost during the previous month (S&P Managed Care Index; +18.2%). Their rebound was triggered by the news that Warren Buffett’s investment company Berkshire Hathaway had invested USD 1.6bn in UnitedHealth. We have generally observed that investor sentiment toward the healthcare sector has become less negative. The medtech sector (MSCI World Healthcare Equipment & Supplies Net Index +0.4%) also delivered a positive return, and the Bellevue Medtech & Services (Lux) Fund (+0.7%) outperformed its benchmark. The anticipated rate cut by the Federal Reserve should give fast-growing medtech stocks an additional tailwind.

Large-cap medtech names delivered a mixed performance in August. Investors appear to have trimmed their positions in widely held stocks such as Boston Scientific (-1.8%), Stryker (-2.7%), and Intuitive Surgical (-4.0%) and reinvested the proceeds in under-owned stocks such as Medtronic (+0.4%), Abbott (+2.6%), and Zimmer Biomet (+13.0%). The latest quarterly reporting season came to an end during the month under review. Idexx (+18.2%) and Insulet (+15.0%) sailed past consensus expectations, while eye care specialists Alcon (-12.1%) and Cooper (-6.9%) fell short of expectations.

Idexx demonstrated that it can generate high sales growth despite the continued weakness in veterinary practice visits in the US thanks to new innovative diagnostic tests. Insulet reported strong Q2 sales and earnings that clearly beat expectations, and management raised its full-year growth target for 2025. In addition, Insulet reported a record >40% increase in new patient starts, which is a good indicator of high sales growth going forward.

While the healthcare sector in general is hardly affected by downturns in consumer sentiment, weak consumer sentiment does have an impact on certain areas where patients have to pay for some or all of the costs out of their own pocket. For example, the market for high-end intraocular lenses (which are only partially reimbursed) has weakened in recent months, and this weighed on Alcon’s sales growth in the second quarter. However, new product launches during the past few quarters should gradually boost sales growth significantly beginning in Q3. Cooper’s Q2 results failed to meet expectations. The company did announce an expansion of contracts with large customers in the contact lens business, but this led to a brief drop in orders for older products. This destocking effect should fade away over the next few quarters. Dexcom (-8.9%) beat analyst expectations for Q2, but investors were not entirely satisfied. While Dexcom performed well in the US, its sales growth there continued to lag the growth rates reported by its competitor Abbott, which can be traced to pricing strategies. This effect should subside over the next few quarters.

Healthcare services (portfolio share: 6.0%) had a positive impact on portfolio performance, led by the US health insurers UnitedHealth (+21.2%), Humana (+18.6%), Molina Healthcare (+11.8%), Elevance Health (+9.9%), Cigna (+9.8%), and Centene (+8.7%). Their rebound was triggered by the news that Warren Buffet’s investment company had invested USD 1.6bn in UnitedHealth. Hospital chain operator HCA Healthcare (+11.4%) and healthcare IT provider Privia (+15.2%) also performed well. All performance data is in EUR / B shares.

Based on the very good Q2 results and full-year guidance for 2025 reported by medtech companies as well as our latest talks with company executives, we expect surgical procedure volume growth to remain at a high level throughout 2025. A record-high valuation discount versus Wall Street and low valuations that were last seen during the height of the pandemic are additional arguments 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.