Bellevue Medtech & Services (CH)

August readouts showed a continued decline in US economic activity. Jobs data for July weakened, and the initial nonfarm payroll numbers for May and June were revised down by about 250,000. Core inflation was largely in line with expectations, which allowed Fed Chair Powell to flag a rate cut in September during his speech at the Jackson Hole Symposium.

The total market advanced +1.0% in August. Defensive healthcare clearly beat the market with a gain of +3.4%. Medtech and healthcare service providers delivered an even better monthly return of +4.3%. The Bellevue Medtech & Services (CH) Fund outperformed its benchmark and closed +5.0% higher. Healthcare services contributed +4.5% to the fund’s performance, and medtech stocks contributed +0.5%.

HCA Healthcare (+12.3%) was a performance driver, while Veeva Systems (-6.8%) and McKesson (-2.6%) detracted. HCA Healthcare was marked up on hopes that Congress would extend HIX subsidies that make health insurance more affordable for low- and middle-income individuals. Veeva Systems retreated after Salesforce announced that it had won another top 20 pharmaceutical company for its CRM system.

US health insurers UnitedHealth (+22.2%), Humana (+19.7%), Molina Healthcare (+12.7%), Elevance Health (+10.8%), Cigna (+10.7%), and Centene (+9.6%) advanced and made positive contributions to absolute and relative performance.

UnitedHealth surged on the news that Berkshire Hathaway had acquired a large stake in the company, which lifted US health insurance stocks across the board. UnitedHealth appointed a new CFO, understandably so after several downward guidance revisions following the return of Hemsley as CEO and several other high-level management changes. The company also settled its litigation with the US Department of Justice (DOJ) over its acquisition of Amedisys announced in June 2023.

Large-cap medtech stocks such as Idexx Laboratories (+19.2%), Zimmer Biomet (+13.9%), Becton Dickinson (+6.5%), Abbott (+3.4%), and Medtronic (+1.2%) made positive contributions to performance. Idexx Laboratories jumped after releasing better-than-expected top-line growth in Q2, driven by strong sales of its inVue Dx Cellular Analyzer. Zimmer Biomet reported better-than-expected results for Q2 and increased its earnings per share (EPS) forecast. Becton Dickinson beat investors’ low expectations for quarterly sales and earnings and adjusted its full-year earnings guidance slightly higher.

Alcon (-11.4%), Dexcom (-8.2%), Intuitive Surgical (-3.2%), and Stryker (-1.9%) were performance detractors. Alcon’s sales growth for Q2 was slower than expected, particularly in its Surgical division, and management cut its sales outlook for 2025. Dexcom shares were pressured by unfounded rumors about reliability issues with its G7 CGM system.

All performance figures are in CHF, with fund performance shown for AA shares.

We see considerable upside potential in the healthcare services segment, specifically for hospital operators, healthcare technology companies and US health insurers. Hospital operators should benefit from high patient volumes and an only moderate increase in payroll costs. We expect solid member growth at health insurers in 2026 in addition to higher margins, particularly in Medicare Advantage and Medicaid business lines. Continued high US Treasury yields could also have an accretive effect on earnings.

Judging by the latest round of pleasing quarterly results in the medtech space, we expect strong surgical procedure volume growth for 2025. The resulting operating leverage, the weak USD, and lower-than-threatened tariff rates should have a positive impact on future EPS growth in the medtech sector.

Moreover, the approval and launch of major new products is expected to generate additional sales growth for medtech companies, with a likewise positive impact on their valuations. 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 robotic surgical system from Intuitive Surgical.