As the U.S. Congress is about to return to business after a month’s recess, the political dilemmas in the United States are expected to aggravate. While the Trump administration is grappling with a wide range of problems, investors are worried about the impact of the tumultuous political scenario on their portfolio returns.
The MedTech industry has been facing volatile economic conditions for long. This is also reflected by the continuous rise in the SXI Bio+ MedTech Index, which has rallied 31.3% since August 2016.
What’s Fueling the Volatility?
The MedTech space typically faces the brunt of regulatory changes. Many economists believe that changes in MedTech-related laws might increase the burden. Among the recent regulatory changes, President Trump signed the FDA Reauthorization Act (FDARA) into law which extends through fiscal 2022 and revises FDA user fees for medical devices. Complicating the situation, the Centers for Medicare and Medicaid Services (CMS) recently issued a proposed rule under which, beginning October, Medicaid disproportionate share hospital (DSH) allotments will be slashed by more than $43 billion over a period of 10 years.
Moreover, the industry is looking forward to the nullification of the infamous Cadillac tax (40% excise tax on high-cost healthcare plans). There is also a possibility that the Medical Device fraternity will be exempt from the 2.3% medical device tax. In this regard, the Trump administration has successfully delayed the Cadillac tax until 2026.
Factors Dampening Market Prospects
For many economists on the domestic front, the Trump administration has still a lot to deal with. The government is currently under pressure to arrange for funds to run its operations along with the need to raise the debt ceiling to be able to meet the payment deadlines. Adding to the woes is Trump’s rigid stance on the Mexican Wall agenda, wherein he is insisting the funding budget to include provisions for the Wall as well.
Other major issues include the reauthorization of the National Flood Insurance Program and federal funding for the Children’s Health Insurance Program by the end of this fiscal.
Apart from the uncertainties plaguing the domestic arena, international issues like the escalating North Korea-Japan tensions and terror attacks in Spain dealt a blow to the markets as well.
Guard Your Portfolio With These 3 Low-Beta Value Stocks
A time-tested way to earn stable returns in the face of economic turbulence is to invest in low-beta stocks. Beta measures the volatility or risk of a particular asset in comparison to the market. In other words, beta gauges the extent of a security’s price movement relative to the market. Thus, investors should opt for low-beta stocks, which are inherently less volatile than the markets they trade in.
We have selected three low-beta MedTech stocks (beta less than 1) that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a Value Score of A.
To note, value stocks offer an opportunity to buy a stock that is currently undervalued by the market. We think investing in these stocks could actually be a safer bet, given their inclination for steady growth and momentum in price.
Irvine, CA-based Masimo Corporation (MASI - Free Report) is a Zacks Rank #2 stock with a beta of 0.84 and long-term earnings growth rate of 11.1%. Also, Masimo, a world leader in the production, distribution and marketing of noninvasive monitoring technologies worldwide, has witnessed an uptrend in estimates for full-year 2017 over the last 30 days. Adding to its solid trajectory, the company currently possesses a Value Score of B and has posted positive earnings surprises in three of the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Masimo Corporation Beta
Another company that is worth a look is Lantheus Holdings, Inc. (LNTH - Free Report) , with a long-term earnings growth rate of 12.5%. This North Billerica, MA-based company carries a Zacks Rank #2 and a Value Score of A. Further, it has a beta of 0.95 which is likely to shield it from market vagaries. Lantheus Holdings also showcases upward revisions in its estimates for fiscal 2017 over the past 60 days.
Lantheus Holdings, Inc. Beta