Bellevue Medtech & Services

The easing of tensions in the Iran conflict led to a recovery in equity markets in April, with the broad equity market closing at (+7.9%). The healthcare sector (-1.8%) and the medtech sector (-5.3%) did not benefit from the lower oil prices and easing inflation concerns associated with the agreed ceasefire. As a result, the medtech sector is currently trading at historically low absolute and relative valuation levels. The Bellevue Medtech & Services Fund (-3.3%) outperformed its benchmark, primarily due to the strong performance of US health insurers (services).

Reporting of first-quarter results peaked during the month under review. While initial market reactions to the results were positive, e.g. Boston Scientific (+9%), Intuitive Surgical (+7%) and UnitedHealth (+7%), these gains in the medtech sector could not be sustained over the course of the month. Large-cap medtech companies such as Intuitive Surgical (-2.3%), Medtronic (-8.0%), Boston Scientific (-9.6%) and Abbott (-12.4%) all closed lower. Abbott missed expectations for Q1 2026, mainly due to weaker performance in its diabetes segment. The blood glucose monitoring business grew below expectations. In addition, the relatively mild flu season weighed on the diagnostics business. As a consequence, the company slightly lowered its full-year guidance.

Glaukos (+31.3%) and Hoya (+6.5%) were among the strongest performers. Glaukos exceeded expectations with strong Q1 2026 results and raised its full-year guidance after just the first quarter. In particular, the iDose ocular implant for lowering intraocular pressure exceeded expectations following somewhat unclear demand dynamics in H2 2025, while reimbursement expansion for Epioxa, a new treatment for corneal thinning, is progressing well. The company has a strong product pipeline for 2026, making the revised guidance still appear conservative and pointing to further strong quarterly results over the course of the year. Hoya continued to benefit from ongoing investment plans by technology companies in data centers and storage capacity.

Performance was negatively impacted by Insulet (-19.3%) after the company added further batches to the voluntary recall of certain Omnipod 5 shipments announced in March. While this initially unsettled investors, the impact on full-year results is limited and the company did not adjust its guidance.

US health insurers performed very strongly: Centene (+61.4%), UnitedHealth (+34.8%), Elevance (+26.6%) and Cigna (+7.2%) made positive contributions to performance. Centene, UnitedHealth, Elevance and Cigna reported their first-quarter results in April, all of which came in above expectations. Guidance for 2026 was only raised cautiously. The overall tone of management teams was constructive but not euphoric: Positive trends in cost development and customer retention are tempered by the fact that available data so far mainly reflects January and February, which were influenced by winter storms and a mild flu season. The second quarter will therefore be a key test of whether the recovery in the health insurance sector is sustainable.

All performance data in EUR / B shares.

In recent years, there has been a gap in the medtech sector between very solid operational fundamentals and depressed valuation multiples. We expect this gap to begin to close. The withdrawal of misallocated capital has pushed valuations to historically low levels, creating a pronounced disconnect between market prices and intrinsic value. After consensus estimates were reset to more realistic levels, the non-cyclical and defensive characteristics of the medtech sector are regaining attractiveness.

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 most important long-term success factor remains the approval and launch of relevant new products, which should continue to support strong revenue growth.

We expect a significant margin recovery among US health insurers in 2026 (and beyond), particularly in the Medicare Advantage segment. Persistently high interest rates could provide additional support to earnings. Investors have already started to take advantage of attractive valuation levels for initial investments in this segment, in contrast to the medtech sector.