The second half of 2017 has already started, but for the 63-million citizens who voted for President Donald Trump at Capitol Hill have yet to witness the abolishment of Obamacare or a Mexican wall. The dollar has been under strong selling pressure this year amid ongoing uncertainty over the economic agenda of Trump and mounting speculation on whether the Fed will implement a third-rate hike this year.
Given such volatile economic conditions, investors will feel intimidated with regard to the investment scenario. In fact, increased volatility on the back of a significant increase in the CBOE Volatility Index (VIX) indicate bearish market prospects. Apart from domestic events, issues like the escalating North Korea-Japan tension and terror attacks in Spain also resulted in markets being subdued.
What Now for Medtech
At present the focal point at the Capitol Hill seems to be tax cuts. But we feel it’s only a hogwash to unite the GOP under one banner after a divisive summer for the apocalyptic battle for Obamacare repeal. Amid such political conundrum, market watchers will keep a tab on the Medical space. The fraternity worries whether the final ‘Trump-care plan’ will still include the MedTech tax repeal in its agenda.
Meanwhile, the old template of the plan, which promised to eradicate the infamous 2.3% medical device tax and the Cadillac tax (40% excise tax on high-cost healthcare plans) was not a bad deal. Amid such uproar, the question that emerges is how medical product players stand to gain or lose.
While selection of the right stocks can be quite an ardent task, a little care and precision can make the job easy. Given the current lack of clarity, let us concentrate on some powerful long-term tailwinds of the medical device industry including mergers & acquisitions (M&A), emerging market expansion, positive demographic trends and new product innovation. These have been a driving force behind the sector’s impressive performance amid severe socio-economic and political instability.
The wide gamut of Medical Device comes here to the rescue. Within the Zacks Industry classification, Medical Device is broadly grouped into the Medical sector (one of 16 Zacks sectors) and further sub-divided into important areas like Medical – Instruments, Medical – Products and Medical – Dental Supplies.
Screening Criteria
In this article, we have picked a winner from each of the aforementioned areas that have traded higher than the S&P 500 index through the past year. Also, based on their strong fundamentals, strategic implementation, planned execution and certain positive catalysts, they carry a huge upside potential and a high probability of outperforming the S&P 500 market index in the coming days. Zacks has designed the Style Score System to compare each parameter of a stock with the peer group for an analysis of whether the stock is attractive from the value perspective.
These stocks currently flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of ‘A’ or ‘B.’ Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. Their market capitalization all are in multi-billions, testifying to their strong liquidity.
The 2017 estimate revision trend is significantly positive and earnings growth expectation is above the S&P 500. Finally, the industry’s lower-than-market positioning calls for more upside in the second half of 2017.
Top Picks
The Dental Supplies industry is currently ranked at #110. It has significantly climbed from last week’s rank #196. The industry has outperformed the S&P 500 by registering a gain of 0.33% over the past month. The index on the other hand has shed 0.81%. In this space, we are bullish on VWR Corporation VWR.
Headquartered in Radnor, PA, VWR Corporation is an independent worldwide provider of products, services and solutions to laboratory and production facilities. With a price surge of approximately 32.28% year to date, this Zacks Rank #2 stock is an attractive pick. Earnings for this company are expected to grow 6.51% this year. You can see You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The Instruments industry is currently ranked #107. It has significantly climbed from last week’s rank #187. The industry has outperformed the S&P 500 by registering a gain of 17.13% year to date. The index on the other hand has shed 0.81%. In this space, we are bullish on IDEXX Laboratories Inc. IDXX.
Headquartered in Delaware NJ, IDEXX Laboratories is a developer, manufacturer and distributer of products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. The company also sells a series of portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market.
With a price surge of approximately 28.18% year to date, this Zacks Rank #2 stock is an attractive pick. Earnings for this company are expected to grow 26.96% this year.
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The Products industry is currently ranked at #185. It has significantly climbed from last week’s rank #188. The industry has outperformed the S&P 500 by registering a gain of 19.02% year to date. The index on the other hand has rose only 9.93%%. In this space, we are bullish on Smith & Nephew plc SNN.
Headquartered in London, United Kingdom, Smith & Nephew is a manufacturer and distributor of advanced medical devices in the sports medicine, joint reconstruction, trauma and wound management areas. With a price surge of approximately 19.02% year to date, this Zacks Rank #2 stock is an attractive pick. Earnings for this company are expected to grow 9.09% this year.
Bottom Line
At the moment, the future of the MedTech industry looks bright, courtesy an expanding global population, rising popularity of digital healthcare services and the rapid development of technological know-how and its incorporation in the healthcare sector. With global Medtech sales expected to grow at a CAGR of 5.2% to more than $500 billion by 2021 (as per Evaluate Ltd.), we believe the aforementioned stocks can be promising additions to your healthcare portfolio, backed by positive momentum in share price and solid future earnings growth projections.
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