Bellevue Medtech & Services (CH)

US labor market data for October and November released in December showed signs of weakening, while inflation in November also came in well below expectations. Accordingly, the Fed’s 25 bp rate cut in December to a target range of 3.5%3.75% didn’t came as a surprise. By contrast, the central bank’s cautious outlook regarding further rate cuts was unexpected.

The broad equity market declined by 0.4% in December. Following the strong performance in November, the healthcare sector (-2.0%) was unable to keep pace. The correction was particularly pronounced in the medtech & services segment, which declined by 4.4%. The Bellevue Medtech & Services Fund fell by 4.9% and underperformed its benchmark. Medtech stocks detracted -3.8% from performance, while healthcare services contributed -1.1%.

HCA Healthcare (-9.1%), Veeva Systems (-8.2%) and McKesson (-7.9%) were the main detractors from performance. Shares of the largest US hospital operator, HCA, declined after the expanded subsidies for private health insurance plans (ACA subsidies) had not yet been extended.

US health insurers performed mostly positively. Molina (+15.7%), Centene (+3.4%), Humana (+3.3%) and Elevance (+2.9%) made positive contributions to portfolio performance. By contrast, CVS (-2.4%) and UnitedHealth (-0.4%) detracted slightly. Molina’s share price rebounded sharply following the strong and partly overdone correction in November. CVS Health’s Investor Day was overall positive, but the market reaction remained muted. This reflected investor skepticism toward the outlook for the PBM (pharmacy benefit management) business, which continues to face structural margin pressure from the transition toward more transparent pricing models. This development is also likely to have weighed on UnitedHealth’s share price, as the group is one of the largest PBM providers through OptumRx.

Innovative, faster-growing medtech companies such as Penumbra (+4.8%), Cooper (+3.9%) and Dexcom (+3.3%) made positive contributions to both absolute and relative performance. Penumbra outperformed, supported by positive analyst commentary pointing to an attractive setup for 2026 with easing headwinds and several potential catalysts. Cooper rebounded after disappointing quarters, delivering better-than-expected Q4 results, a constructive outlook for 2026, and the announcement of a strategic review of its business model. Dexcom advanced as investors rotated into laggards of the 2025 equity market. Quality issues related to the G7 product appear to have been resolved, while several potential drivers for 2026 are emerging, including a 15-day wear sensor and a possible CMS reimbursement decision for CGM use in type 2 diabetes patients not treated with insulin.

After the strong performance in the previous month, many large-cap stocks corrected, partly driven by the year-end profit taking typically observed in stocks with strong full-year performance. Medtronic (-9.2%), Boston Scientific (-7.3%), Stryker (-6.2%) and Abbott (-4.0%) came under pressure. Abbott received FDA approval earlier than expected for its pulsed-field ablation (PFA) catheter Volt, which weighed in particular on the share prices of Medtronic and Boston Scientific. In addition, the announcement of an earlier-than-planned market launch of Google’s smart glasses model put significant pressure on EssilorLuxottica’s share price (-12.6%).

Life science tools companies Thermo Fisher (-3.0%) and Danaher (-0.1%) also weighed slightly on performance.

All performance data in CHF / AA shares.

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

Based on the solid Q3 results reported by medtech companies and our discussions with numerous management teams in November and December, we expect robust growth in surgical procedure volumes in the fourth quarter. Operating leverage, the weaker US dollar, and lower tariffs should provide additional support to earnings growth.

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