Bellevue Medtech & Services

In December, the broad equity market was slightly lower at -0.3%, in line with the previous month. The healthcare sector (-1.9%) and the medtech sector (-4.6%) also corrected following their strong outperformance in the prior month. The Bellevue Medtech & Services Fund (-4.4%) slightly outperformed its benchmark.

December marked the end of an eventful year for healthcare equities. After the first nine months were dominated by political uncertainty surrounding drug pricing in the US, equity performance entered a recovery phase in Q4 2025. The medtech sector (+2.8%) developed broadly in line with the overall equity market (+3.3%), while the broader healthcare sector recorded a significant gain (+10.8%). The return of sector momentum leaves us constructive on the outlook for 2026, particularly for the medtech sector. Inflows into the broader healthcare sector are also supportive for medtech, which continues to offer additional catch-up and re-rating potential. In addition, the US dollar – the most important currency for healthcare – has remained very stable since the start of Q4 2025, following its sharp depreciation during the first nine months of the year (-12% versus the euro and the Swiss franc).

In the month under review, performance contributions were driven primarily by small- and mid-cap companies, including Glaukos (+5.0%), Align (+4.9%), Penumbra (+4.8%), Cooper (+4.0%) and Dexcom (+3.4%). After several disappointing quarters, Cooper reported better-than-expected Q4 2025 results, provided an optimistic outlook for 2026, and announced a strategic review of its business model. At investor conferences, Align highlighted financial levers that should enable the company to meet 2026 consensus estimates even without an improvement in the macroeconomic environment. Insulet’s share price (-14.1%) reacted negatively to information related to the announced IPO of Medtronic’s diabetes unit, MiniMed. MiniMed plans to file for US approval of its patch insulin pump with a longer wear time than Insulet’s Omnipod 5 earlier than expected, already in 2026.

Following the strong performance in the previous month, many large-cap stocks corrected, partly driven by typical year-end profit-taking in stocks with strong full-year performance. Medtronic (-9.2%), Boston Scientific (-7.2%), Stryker (-6.1%) and Abbott (-3.9%) all declined. Abbott received earlier-than-expected FDA approval for its Volt pulse field ablation (PFA) catheter, which weighed on the share prices of Medtronic and Boston Scientific. The announcement of an earlier-than-expected market launch of Google’s smart glasses model also weighed on EssilorLuxottica (-12.6%).

US health insurers mostly posted positive performance: Molina (+15.7%), Centene (+3.4%), Humana (+3.4%), Elevance (+3.0%), UnitedHealth (-0.4%) and Cigna (-1.3%). Investors appear to be positioning for a recovery in the sector. By contrast, hospital operators weighed on performance, including Tenet (-9.4%) and HCA (-9.1%). The US Senate and the White House failed to reach a timely solution regarding the healthcare exchanges, and tax subsidies for the Affordable Care Act (ACA) expired at the end of 2025. This could lead to higher payment defaults for hospitals.

All performance data in EUR / B shares.

Based on our discussions with numerous management teams, we expect that at the J.P. Morgan Healthcare Conference in January – the most important healthcare investor conference of the year – many companies will provide initial positive indications for Q4 2025 performance as well as generally optimistic outlooks for the 2026 financial year. We also expect 2026 to see a very positive development in surgical procedure volume growth.

The currently record-high valuation discount of the sector versus the US equity market is an additional factor supporting an investment in the Bellevue Medtech & Services (Lux) Fund. Improving sector momentum and renewed investor interest in healthcare leave us constructive on the outlook for 2026, particularly for the medtech sector. Inflows into the broader healthcare sector should also benefit medtech, which continues to offer additional catch-up and re-rating potential. Moreover, there are strong indications that M&A activity is accelerating again, with large-cap companies likely to deploy their strong balance sheets to drive additional external growth. The most important long-term success factor remains the approval and market launch of relevant new products, which should support sustained revenue growth.

US President Trump is expected to engage with US health insurers in the near term, pointing to a negotiation process and potential agreement (“deal”) similar to that reached with pharmaceutical companies. As seen in the pharmaceutical sector, this could lead to a de-risking of the insurance sector and act as a positive driver for affected stocks.