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Healthcare has been a hot topic of late with presidential candidates Clinton and Trump doubling down on promises as the run-up to the election on Nov 8. And it makes sense because according to a Pew Research survey from earlier this year, 74% of voters said that healthcare was an important consideration determining their vote, behind only economy, terrorism and foreign policy, which were the top considerations.
As far as healthcare-focused stocks are concerned, Clinton has it in for insurance and pharma companies, blaming them for rising drug costs. She also doesn’t like pharma companies splurging on ads when they could have put the money into R&D instead. Trump would like to relax regulations for insurance companies in a way that would promote competition.
Whatever their theories, these segments of the healthcare sector are likely to be volatile in the near term. So this might just be the right time to take a look at the medical instruments segment, which has a lot going for it.
For one thing, medical instrument makers are increasingly collaborating with technology companies to expand beyond traditional genres. This has opened up opportunities in robotics, wearables, implantable devices, electronic health records (EHR) and more. So with the government focused on reforms, it’s not too far-fetched to imagine that corporate focus (and wellness spending) on Fitbit FIT-type wearables that are part of preventive healthcare will increase.
Digital health startups are also seeing record funding. CB Insights data puts 2015 investment in the segment at $5.74 billion, led by organizations like Qualcomm’s QCOM Qualcomm Ventures, Alphabet’s GOOGL Google Ventures, Merck (MRK - Free Report) , General Electric GE as well as VC firms Norwest Venture Partners and Lux Capital.
Given the emerging markets, the segment is likely to get more difficult to understand, so it helps to know the basic categories.
How Medical Instruments Are Categorized
The Census Bureau classifies the industry into seven parts and provides some numbers indicating the size of each part. As with a lot of census data, it’s not too timely but rather a fair estimate of longer-term trends.
The latest data, from 2012, mentions surgical and medical instruments (anesthesia apparatus, orthopedic instruments, optical diagnostic apparatus, blood transfusion devices, syringes, hypodermic needles and catheters) as the biggest category comprising 29% of total value of shipments.
Surgical appliances and supplies (includes artificial joints and limbs, stents, orthopedic appliances, surgical dressings, disposable surgical drapes, hydrotherapy appliances, surgical kits, rubber medical and surgical gloves, and wheelchairs) is second with 22%.
Then comes electro-medical equipment, which is basically powered devices like pacemakers,
patient-monitoring systems, MRI machines, diagnostic imaging equipment (including informatics equipment) and ultrasonic scanning devices with 17%.
In-vitro diagnostic substances (chemical, biological or radioactive substances used for diagnostic tests performed in test tubes, Petri dishes, machines and other diagnostic test-type devices) follows with 14%.
Radiation apparatus, comprising x-ray machines and other diagnostic imaging, and computed tomography (CT) equipment accounts for 8%.
Around 6% comes from ophthalmic equipment and the balance from dental equipment.
In 2015, the above categories together generated $43 billion in revenue according to the 2016 International Trade Administration report.
The Zacks System
An investment plan is personal. It isn’t just about stocks that will do really well in the near future as with the Zacks Rank#1 (Strong Buy) and #2 (Buy) stocks. It’s also about other things like your risk appetite and investment style because no investment advice is 100% foolproof.
There’s always the chance that the market will go slightly different than what was envisaged. That’s why we need a plan that has been proved to work in the past and it’s also where the Zacks Rank and Zacks Style Scores come in handy.
The Zacks Rank is a quantitative measure that for more than a quarter century from 1988 through 2015, has nearly tripled the S&P 500 with an average gain of 26% per year. What’s more, these returns were examined and attested by Baker Tilly Virchow Krause, LLP, an independent accounting firm.
The Style Score on the other hand, is best paired with a Zacks Rank #1 or #2 (You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here). It essentially captures your investment style. So if you’re a value investor, you’re looking for undervalued stocks that will appreciate in the future. If you’re a growth investor, you’re willing to pay a higher multiple today for returns that may not be on the immediate horizon. Momentum investors are surf-boarders: they want to ride the wave and make some quick gains.
How to Play the Segment
There are plenty of opportunities in the medical instruments segment right now, so there’s something in here for everyone.
Plan for the Value Investor
Simply look for stocks with a Zacks Rank #1 or #2 and a Value Score A or B. The following picks satisfy both these criteria:
Baxter International Inc. (BAX - Free Report) focuses on essential renal and hospital products, including home, acute and in-center dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition; biosurgery products and anesthetics, and pharmacy automation, software and services. Key criteria considered are:
Zacks Rank #2
Value Score B
Current quarter EPS estimate up 10.9% and 2016 EPS estimate up 11.0% in the last 7 days.
Thermo Fisher Scientific Inc. (TMO - Free Report) provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery, and diagnostics through four premier brands: Thermo Scientific, Life Technologies, Fisher Scientific and Unity Lab Services. Key criteria considered are:
Zacks Rank #2
Value Score B
The company is slated to report results today and since it has topped estimates in each of the last four quarters, this one may not be too different.
Syneron Medical Ltd. manufactures and distributes medical aesthetic devices and systems for dermatologists, plastic surgeons and other qualified practitioners using non-invasive techniques. The company gets its name from its proprietary Electro-Optical Synergy technology, which makes use of the synergy between electrical energy, including radio frequency (RF) energy and optical energy to deliver the treatments. Key criteria considered are:
Rank #2
Value Score B
The company beat the Zacks Consensus Estimate by 133.33% in the last quarter and will report third-quarter results on Nov 9.
Plan For The Growth Investor
Simply look for stocks with a Zacks Rank #1 or #2 and a Growth Score A or B. The following picks satisfy both these criteria:
Abiomed, Inc. offers temporary percutaneous mechanical circulatory support devices for people with failing but potentially recoverable hearts. Its products are designed to enable the heart to rest, heal and recover by improving blood flow to the coronary arteries and end-organs and/or temporarily performing the pumping function of the heart. Key criteria considered are:
Rank #1
Growth Score A
The company, which will report results today, topped estimates in each of the last four quarters.
Hologic Inc. (HOLX - Free Report) supplies diagnostics products, medical imaging systems and surgical products primarily related to women's health. It operates through four segments: Diagnostics, Breast Health, GYN Surgical and Skeletal Health. Some of its products are X-ray bone densitometers and ultrasound bone analyzers. Key criteria considered are:
Rank #2
Growth Score B
The company, which will report results on Nov 2 reported EPS that topped the Zacks Consensus Estimate in each of the last four quarters.
AngioDynamics, Inc. (ANGO - Free Report) makes medical, surgical and diagnostic devices used in minimally invasive, image-guided procedures for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings. Key criteria considered are:
Rank #1
Growth Score B
The company’s earnings has topped the Zacks Consensus Estimate in each of the last quarters by a wide margin.
Summing Up
Buy-ranked companies with a VGM score (that stands for value, growth and momentum) of A or B will not disappoint you, whatever your investment style. But always check for earnings surprises and estimate revisions as well, because that is an indication that the momentum will continue.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>
See More Zacks Research for These Tickers
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Image: Bigstock
Your Personal Healthcare Investment Plan
Healthcare has been a hot topic of late with presidential candidates Clinton and Trump doubling down on promises as the run-up to the election on Nov 8. And it makes sense because according to a Pew Research survey from earlier this year, 74% of voters said that healthcare was an important consideration determining their vote, behind only economy, terrorism and foreign policy, which were the top considerations.
As far as healthcare-focused stocks are concerned, Clinton has it in for insurance and pharma companies, blaming them for rising drug costs. She also doesn’t like pharma companies splurging on ads when they could have put the money into R&D instead. Trump would like to relax regulations for insurance companies in a way that would promote competition.
Whatever their theories, these segments of the healthcare sector are likely to be volatile in the near term. So this might just be the right time to take a look at the medical instruments segment, which has a lot going for it.
For one thing, medical instrument makers are increasingly collaborating with technology companies to expand beyond traditional genres. This has opened up opportunities in robotics, wearables, implantable devices, electronic health records (EHR) and more. So with the government focused on reforms, it’s not too far-fetched to imagine that corporate focus (and wellness spending) on Fitbit FIT-type wearables that are part of preventive healthcare will increase.
Digital health startups are also seeing record funding. CB Insights data puts 2015 investment in the segment at $5.74 billion, led by organizations like Qualcomm’s QCOM Qualcomm Ventures, Alphabet’s GOOGL Google Ventures, Merck (MRK - Free Report) , General Electric GE as well as VC firms Norwest Venture Partners and Lux Capital.
Given the emerging markets, the segment is likely to get more difficult to understand, so it helps to know the basic categories.
How Medical Instruments Are Categorized
The Census Bureau classifies the industry into seven parts and provides some numbers indicating the size of each part. As with a lot of census data, it’s not too timely but rather a fair estimate of longer-term trends.
The latest data, from 2012, mentions surgical and medical instruments (anesthesia apparatus, orthopedic instruments, optical diagnostic apparatus, blood transfusion devices, syringes, hypodermic needles and catheters) as the biggest category comprising 29% of total value of shipments.
Surgical appliances and supplies (includes artificial joints and limbs, stents, orthopedic appliances, surgical dressings, disposable surgical drapes, hydrotherapy appliances, surgical kits, rubber medical and surgical gloves, and wheelchairs) is second with 22%.
Then comes electro-medical equipment, which is basically powered devices like pacemakers,
patient-monitoring systems, MRI machines, diagnostic imaging equipment (including informatics equipment) and ultrasonic scanning devices with 17%.
In-vitro diagnostic substances (chemical, biological or radioactive substances used for diagnostic tests performed in test tubes, Petri dishes, machines and other diagnostic test-type devices) follows with 14%.
Radiation apparatus, comprising x-ray machines and other diagnostic imaging, and computed tomography (CT) equipment accounts for 8%.
Around 6% comes from ophthalmic equipment and the balance from dental equipment.
In 2015, the above categories together generated $43 billion in revenue according to the 2016 International Trade Administration report.
The Zacks System
An investment plan is personal. It isn’t just about stocks that will do really well in the near future as with the Zacks Rank#1 (Strong Buy) and #2 (Buy) stocks. It’s also about other things like your risk appetite and investment style because no investment advice is 100% foolproof.
There’s always the chance that the market will go slightly different than what was envisaged. That’s why we need a plan that has been proved to work in the past and it’s also where the Zacks Rank and Zacks Style Scores come in handy.
The Zacks Rank is a quantitative measure that for more than a quarter century from 1988 through 2015, has nearly tripled the S&P 500 with an average gain of 26% per year. What’s more, these returns were examined and attested by Baker Tilly Virchow Krause, LLP, an independent accounting firm.
The Style Score on the other hand, is best paired with a Zacks Rank #1 or #2 (You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here). It essentially captures your investment style. So if you’re a value investor, you’re looking for undervalued stocks that will appreciate in the future. If you’re a growth investor, you’re willing to pay a higher multiple today for returns that may not be on the immediate horizon. Momentum investors are surf-boarders: they want to ride the wave and make some quick gains.
How to Play the Segment
There are plenty of opportunities in the medical instruments segment right now, so there’s something in here for everyone.
Plan for the Value Investor
Simply look for stocks with a Zacks Rank #1 or #2 and a Value Score A or B. The following picks satisfy both these criteria:
Baxter International Inc. (BAX - Free Report) focuses on essential renal and hospital products, including home, acute and in-center dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition; biosurgery products and anesthetics, and pharmacy automation, software and services. Key criteria considered are:
Zacks Rank #2
Value Score B
Current quarter EPS estimate up 10.9% and 2016 EPS estimate up 11.0% in the last 7 days.
Thermo Fisher Scientific Inc. (TMO - Free Report) provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery, and diagnostics through four premier brands: Thermo Scientific, Life Technologies, Fisher Scientific and Unity Lab Services. Key criteria considered are:
Zacks Rank #2
Value Score B
The company is slated to report results today and since it has topped estimates in each of the last four quarters, this one may not be too different.
Syneron Medical Ltd. manufactures and distributes medical aesthetic devices and systems for dermatologists, plastic surgeons and other qualified practitioners using non-invasive techniques. The company gets its name from its proprietary Electro-Optical Synergy technology, which makes use of the synergy between electrical energy, including radio frequency (RF) energy and optical energy to deliver the treatments. Key criteria considered are:
Rank #2
Value Score B
The company beat the Zacks Consensus Estimate by 133.33% in the last quarter and will report third-quarter results on Nov 9.
Plan For The Growth Investor
Simply look for stocks with a Zacks Rank #1 or #2 and a Growth Score A or B. The following picks satisfy both these criteria:
Abiomed, Inc. offers temporary percutaneous mechanical circulatory support devices for people with failing but potentially recoverable hearts. Its products are designed to enable the heart to rest, heal and recover by improving blood flow to the coronary arteries and end-organs and/or temporarily performing the pumping function of the heart. Key criteria considered are:
Rank #1
Growth Score A
The company, which will report results today, topped estimates in each of the last four quarters.
Hologic Inc. (HOLX - Free Report) supplies diagnostics products, medical imaging systems and surgical products primarily related to women's health. It operates through four segments: Diagnostics, Breast Health, GYN Surgical and Skeletal Health. Some of its products are X-ray bone densitometers and ultrasound bone analyzers. Key criteria considered are:
Rank #2
Growth Score B
The company, which will report results on Nov 2 reported EPS that topped the Zacks Consensus Estimate in each of the last four quarters.
AngioDynamics, Inc. (ANGO - Free Report) makes medical, surgical and diagnostic devices used in minimally invasive, image-guided procedures for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings. Key criteria considered are:
Rank #1
Growth Score B
The company’s earnings has topped the Zacks Consensus Estimate in each of the last quarters by a wide margin.
Summing Up
Buy-ranked companies with a VGM score (that stands for value, growth and momentum) of A or B will not disappoint you, whatever your investment style. But always check for earnings surprises and estimate revisions as well, because that is an indication that the momentum will continue.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>