Bellevue Medtech & Services (CH)

In the US, strong labor market data and core inflation in September weighed on consumer sentiment and pushed market interest rates higher. The yield on 10-year US Treasuries rose by 0.54 percentage points to 5.3%. For the first time in more than three years, the Federal Reserve raised its benchmark interest rate by 0.25 percentage points to curb inflation driven by higher oil prices and AI-related investment.

The broad equity market advanced 2.1% in the month under review, supported by the continued recovery in the information technology sector. The healthcare sector gained 1.5%, driven by life science tools and biopharma stocks. The Bellevue Medtech & Services Fund declined 1.7%, outperforming its benchmark (-2.0%). Medtech stocks detracted 1.5% from fund performance, while healthcare services providers had a negative impact of 0.2%.

HCA Healthcare (+6.6%) and Veeva Systems (+3.2%) once again made positive contributions to performance. HCA advanced after management reaffirmed its guidance and analysts highlighted favorable demographic trends and further earnings potential. Veeva benefited from additional customer wins for Vault CRM, new AI products and positive analyst commentary.

US health insurers delivered mixed performance. Humana (+2.9%), Elevance Health (+2.8%) and Cigna (+2.3%) advanced, while CVS Health (-5.7%), UnitedHealth (-2.0%) and Centene (-0.2%) detracted from fund performance. Humana benefited from growing confidence in a normalization of earnings over the medium term. Even without a full recovery in its Medicare Advantage Star Ratings, the insurer could achieve earnings per share of around USD 28 by 2028, approximately three times the level forecast for 2026. At its Investor Day, Cigna unveiled a new strategic framework called «Lead to One». The USD 3 bn modernization and productivity program is designed to support annual earnings per share growth of 10% to 14% through 2030. CVS Health struck a cautious tone on medical cost trends, putting its shares under selling pressure. UnitedHealth also declined as weaker customer satisfaction survey results raised concerns about lower Medicare Advantage Star Ratings.
Performance in the medtech sector was driven primarily by company-specific factors. Intuitive Surgical (+11.5%) benefited from positive management commentary at an investor conference regarding rising surgical procedure volumes, strong demand for its da Vinci 5 system and additional growth drivers from 2027 onward. Stryker (-11.8%), Abbott (-7.5%) and Boston Scientific (-6.6%) weighed on performance. Stryker was affected by persistent supply issues in its vascular business and weaker demand for large joint implants in Europe. Boston Scientific came under pressure following significant sales losses caused by a cyberattack, making its full-year 2026 targets increasingly unlikely to be achieved.

Thermo Fisher (+13.1%) and Danaher (+7.4%) advanced on positive management commentary and growing confidence in a recovery in end markets for life science instruments.

All performance data in CHF/AA shares.

We see considerable upside potential in the healthcare services segment, particularly for hospital operators and US health insurers. Hospitals should benefit from sustained high patient volumes and only moderately higher personnel costs. We expect a recovery in profit margins at health insurers in 2027 and 2028, particularly in Medicare Advantage and Medicaid business lines. Persistently high market interest rates could provide additional support for earnings growth.

Based on medtech companies' Q2 reports and our discussions with numerous management teams, we expect robust growth in surgical procedure volumes in 2026. The resulting economies of scale and refunds of US tariffs should also support solid earnings growth.

The approval and subsequent launch of major new products should continue to bolster sales growth in the medtech sector and stabilize valuations. Examples include Abbott's Volt PFA catheter, Medtronic's Affera and Boston Scientific's Farapulse, the robotic-assisted systems da Vinci 5 from Intuitive Surgical, Hugo from Medtronic and Ottava from Johnson & Johnson, as well as Medtronic's Symplicity Spyral catheter. Numerous clinical data publications and new reimbursement policies should not only strengthen investor confidence but also drive sales growth over the medium term.

The US midterm elections in early November could provide additional tailwinds for medtech & services stocks, as a divided or Democratic-controlled Congress would likely limit regulatory risks and support healthcare system funding.