Bellevue Medtech & Services (CH)

Labor market data for September, published in November, was mixed. Although more jobs were created than expected, the unemployment rate came in above expectations while wage growth fell short. At the same time, consumer sentiment deteriorated sharply. This increased the likelihood of another interest rate cut by the US Federal Reserve in December.

The broad equity market rose by 0.2% in the month under review. The healthcare sector performed significantly better, advancing +8.0% and clearly outperforming the broader market. Pharma, biotech and medtech stocks drove the sector’s gains. Additional momentum came from an agreement between Eli Lilly and Novo Nordisk and the US government, which expands market access for obesity drugs through a targeted pricing strategy.

Companies in the medtech & services sector (+3.6%) also benefited from this agreement, although to a lesser extent. The Bellevue Medtech & Services Fund (+4.5%) once again outperformed its benchmark over the month. Healthcare services providers contributed +0.4% to performance, while medical technology companies were the main drivers, adding +4.1%.

HCA Healthcare (+10.4%) and McKesson (+8.5%) made positive contributions, while Veeva Systems (-17.6%) detracted. HCA expressed strong confidence at an investor conference. Veeva exceeded quarterly expectations and raised its full-year guidance, but closed fewer CRM contracts with large pharmaceutical companies than anticipated.

US health insurers delivered mostly positive returns. Cigna (+13.3%), Centene (+11.1%), Elevance (+6.5%) and CVS Health (+2.7%) contributed positively, while Humana (-11.8%), UnitedHealth (-3.6%) and Molina (-3.3%) weighed on performance. Share prices of Cigna and Centene recovered after being oversold despite solid quarterly results. Humana exceeded Q3 earnings expectations and confirmed its 2025 guidance, but nevertheless unsettled investors. Stronger enrollment growth in Medicare Advantage could pressure margins in 2026, as new members typically generate lower margins in their first years.

Large-cap medtech companies such as Idexx (+19.4%), Medtronic (+16.0%), Intuitive Surgical (+7.2%) and Abbott (+4.1%) made significant contributions to the positive performance. Idexx exceeded high expectations for organic revenue growth with a strong 12% increase in Q3 and raised its revenue and margin guidance for 2025. Medtronic also delivered stronger-than-expected revenue growth, supported in part by progress in next-generation pulsed-field ablation catheters used in the treatment of cardiac arrhythmias. Hoya (-7.9%) and Zimmer Biomet (-3.1%) modestly detracted.
Life science tools companies Danaher (+5.2%) and Thermo Fisher (+4.0%) also contributed positively, supported by improved investor sentiment in the biopharma subsector.

All performance data in CHF / AA shares.

In the healthcare services segment, we see considerable value creation potential in hospital operators, healthcare technology companies and US health insurers. We expect hospitals to benefit from high patient volumes an only moderate increase in payroll costs. We expect solid member growth at health insurers in 2026 in addition to higher margins, particularly in Medicare Advantage and Medicaid business lines. Continued high US Treasury yields could also have an accretive effect on earnings.

Based on the stronger-than-expected Q3 results of medtech companies and our discussions with numerous management teams in October and November, we expect robust growth in surgical procedure volumes in Q4 2025. The resulting operating leverage, the weak US dollar, and the lower-than-expected tariff levels should further support earnings per share growth.

In addition, the approval and launch of relevant new products should continue to drive revenue growth in the medtech sector, which should also be supportive for valuations. Examples include Volt and TriClip from Abbott, Farapulse PFA and Watchman FLX Pro from Boston Scientific, the da Vinci 5 robotic surgical system from Intuitive Surgical, and Medtronic’s Symplicity Spyral catheter for renal denervation to lower blood pressure.