Bellevue Medtech & Services

In February, the broad equity market closed 1.2% higher. The healthcare sector (+3.4%) and the medtech sector (+0.6%) also delivered positive performance. The medtech sector performed well on a broad basis; however, the 4Q 2025 results of large-cap medtech company and benchmark heavyweight Boston Scientific (-17.5%) were assessed critically, despite meeting analyst expectations and leaving earnings estimates for 2026 and 2027 largely unchanged. The Bellevue Medtech & Services Fund (-0.3%) did not outperform its benchmark in February.

The 4Q 2025 reporting season is largely complete. Abbott (+6.9%) partially recovered from the previous month’s weakness, also supported by strong 4Q 2025 results from Exact Sciences – the acquisition is expected to close in 2Q 2026. Hoya (+8.6%) exceeded 3Q 2025 expectations, particularly in the IT segment, benefiting from strong demand in semiconductor manufacturing and data centers. Edwards (+6.8%) also surpassed 4Q 2025 expectations. In addition, a clinical study by Medtronic indicated limited durability of its transcatheter aortic valves, which could enable Edwards to gain market share. Among mid-cap companies, Align (+17.1%) made a particularly strong positive contribution to performance, exceeding 4Q 2025 expectations for revenue and earnings and setting realistic targets for 2026. M&A activity is accelerating: following Penumbra in January, Masimo (+28.3%) also received a takeover offer, with Danaher aiming to expand its position in the hospital segment.

Negative contributions to portfolio performance came from Boston Scientific (-17.5%), EssilorLuxottica (-12.7%) and Medtronic (-4.7%). Boston Scientific met overall investor expectations. Broad-based growth acceleration offset weaker results in the US market in core areas such as electrophysiology (pulsed field ablation) and Watchman (LAAC – left atrial appendage closure). As guidance and analyst estimates remained unchanged, the valuation multiple contracted by more than 20%. We expect positive results from the Champion-AF study at the end of March (Watchman as an alternative for stroke prevention), which should support the share price. EssilorLuxottica significantly exceeded organic revenue growth expectations in 4Q 2025 (+18% vs. 12%), driven by AI glasses. However, margins were diluted due to continued investments in production capacity and market development. In addition, investors are concerned about a potential market entry by Apple. We believe the market is sufficiently large and that EssilorLuxottica is well positioned (fully vertically integrated with a first-mover advantage). Medtronic also detracted despite solid quarterly results. Management comments point to weaker EPS growth for fiscal year 2027 than expected. In addition, the success of the MiniMed IPO (spin-off of Medtronic’s diabetes division) was viewed skeptically.

Healthcare services made a positive contribution to portfolio performance. Hospital operators Tenet Healthcare (+27.1%) and HCA Healthcare (+9.0%) benefited from a stable market environment, and US health insurers Cigna (+6.2%), Centene (+4.1%) and UnitedHealth (+2.7%) also performed positively. Molina (-13.8%), Elevance (-7.0%) and Humana (-1.9%) detracted from performance. Company-specific issues (patient risk categorization) should be resolved by Elevance management in the foreseeable future, whereas we see structural challenges at Molina, which led us to fully exit the position. All performance data in EUR/B shares.

Our discussions with numerous management teams during the J.P. Morgan Healthcare Conference have left us positive on the 2026 financial year. We also expect very positive growth in surgical procedure volumes in 2026.

The sector’s currently record-high valuation discount relative to the US equity market is another factor supporting an investment in the Bellevue Medtech & Services (Lux) Fund. Improving sector dynamics and renewed investor interest in healthcare leave us confident regarding the equity market in 2026 and the medtech sector in particular. Inflows into the broader healthcare sector should also benefit medtech, which continues to offer additional catch-up and re-rating potential. In addition, there are already strong indications that M&A activity is accelerating again and that large-cap companies will use their strong balance sheets to drive additional external growth. The key long-term success factor remains the approval and launch of relevant new products, which should continue to support strong revenue growth.