Bellevue Medtech & Services (CH)

US labor market data released in January, as well as December core inflation, came in below investor expectations. Kevin Warsh was proposed as the next Chair of the US Federal Reserve. He advocates a significant reduction of the Fed’s balance sheet and is not a proponent of loose monetary policy, contributing to a slight increase in interest rates during January.

The broad equity market declined by 0.5%, while the US dollar weakened by 2.5% against the Swiss franc. The healthcare sector (-1.7%) and the medtech & services sector (-5.3%) underperformed. The Bellevue Medtech & Services Fund declined by 7.3% and thus lagged its benchmark. Medtech stocks detracted 3.6% from performance, while healthcare services contributed -3.7%.

While HCA Healthcare (+1.7%) made a positive contribution to performance, Veeva Systems (-11.1%) detracted. HCA surprised with strong Q4 results and guidance for 2026, whereas the expansion of “Claude for Life Sciences” into clinical and regulatory applications weighed on investor sentiment toward Veeva.

Health insurers Centene (+2.4%) and Molina (+0.7%) delivered positive performance contributions, while providers with high exposure to the Medicare Advantage segment, such as Humana (-25.9%), UnitedHealth (-15.4%) and CVS Health (-7.9%), detracted a combined 3.2% from performance. UnitedHealth met earnings expectations in the fourth quarter and confirmed its earnings guidance for 2026, indicating that the restructuring process is progressing as planned. Sentiment was negatively affected by preliminary reimbursement rates for Medicare Advantage 2027 published by the US Centers for Medicare & Medicaid Services (CMS). The increase of around 0.1% was well below market expectations of 3–5% and reflects technical adjustments to the calculation model adopted under the Biden administration. We nevertheless expect higher final rates in early April 2026, as the consultation process has historically resulted in average increases of around 1%, and close to 3% most recently for 2026. In addition, current CMS Administrator Dr. Mehmet Oz has publicly spoken in favor of higher reimbursement rates.

Medtech stocks Penumbra (+12.1%), Hoya (+7.9%), Dexcom (+7.1%), Medtronic (+4.3%) and Stryker (+2.3%) delivered the strongest absolute and relative performance contributions. During the J.P. Morgan Healthcare Conference, Boston Scientific announced the acquisition of Penumbra, while Dexcom surprised investors with better-than-expected preliminary revenue figures for the fourth quarter. Stryker also exceeded market expectations with strong fourth-quarter results and positive guidance for 2026.

Abbott (-14.7%), Intuitive Surgical (-13.4%), EssilorLuxottica (-6.0%) and Boston Scientific (-4.6%) detracted from both absolute and relative performance. While Abbott reported strong results in its medtech business, investors were disappointed by weak performance in the nutrition segment. Intuitive Surgical exceeded expectations in the fourth quarter but guided for procedure growth of only 13–15% in 2026, compared with 13–16% in the previous two years. In conjunction with quarterly earnings, Meta stated that sales of EssilorLuxottica’s Ray-Ban smart glasses more than tripled in 2025, while Samsung announced its own market entry with smart glasses for 2026.

Life science tools companies Danaher (-7.0%) and Thermo Fisher (-2.9%) also weighed on performance after both issued 2026 guidance slightly below expectations.

All performance data in CHF / AA shares.

Within healthcare services, we see significant value creation potential among hospital operators, healthcare technology companies and US health insurers. Hospitals should benefit from strong procedure volumes and only moderate increases in labor costs. For health insurers, we expect solid membership growth and margin improvement in 2026, particularly in Medicare Advantage and Medicaid. Persistently high US Treasury yields could further support earnings accretion.

Based on medtech companies’ fourth-quarter reports to date and our discussions with numerous management teams at the J.P. Morgan Healthcare Conference in January, we expect robust growth in surgical procedure volumes in 2026. Operating leverage, a weaker US dollar and lower tariffs should provide additional support for earnings growth.

In addition, the approval and launch of relevant new products should continue to support revenue growth in the medtech sector and have a positive impact on valuations. Examples include Abbott’s Volt PFA catheter, Boston Scientific’s Farapulse PFA and Watchman FLX Pro, Intuitive Surgical’s da Vinci 5 robotic surgery system, and Medtronic’s Symplicity Spyral catheter and Hugo robotic surgery system.