Over the past few months, the medical device space has been witnessing considerable upheaval owing to a confluence of factors. This has affected the fortunes of MedTech bigwigs like Cardinal Health Inc (CAH - Free Report) , DENTSPLY SIRONA Inc (XRAY - Free Report) and Penumbra Inc (PEN - Free Report) .
The investment climate for medical device majors has become increasingly volatile due to political potshots in Capitol Hill, for and against Obamacare. This is due to the fact that the GOP is making one final push on an Affordable Care Act repeal bill. The legislation, commonly referred to as Graham-Cassidy, aims to convert the Medicaid and premium subsidy dollars into a block-grant structure giving freedom of spending to states.
Past fortnight has witnessed extensive lobbying for and against the Graham-Cassidy bill by legislators to garner for and against the required 50 votes at the Senate. The trend is expected to continue till September 30. Earlier, Obamacare assured coverage to people with pre-existing ailments and restricted insurers from charging them based on health conditions.
The Senate Bill, however, will allow insurers to provide less-than-required coverage in states that get waivers for essential health benefits. However, the changes would not take effect until 2020 but would slash Medicaid budgets to the tune of almost 25% by 2026.
How Is MedTech Positioned?
Though the space remains volatile, there are many stocks in the MedTech domain that promise growth. The question now arises that how to pick safe stocks from the various industries of the MedTech space, in such a scenario. Within the Zacks Industry classification, it 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.
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 one 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 index in the coming days.
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 investors to eliminate negative aspects of stocks and select favorable ones. Their market capitalization is 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 to offset any further volatility in Capitol Hill.
Medical - Dental Supplies
The Dental Supplies industry is currently ranked #185. It fell from last week’s #170. The industry has underperformed the S&P 500 by shedding 0.25% over the past month. The index, on the other hand, has gained 1.94%. By applying Zacks wisdom in this space, we are bullish on STAAR Surgical Company (STAA - Free Report) .
Monrovia, CA-based Staar Surgical develops, manufactures and distributes products used by ophthalmologists and other eye care professionals to improve or correct vision in patients suffering from refractive conditions, cataracts and glaucoma. With a price surge of approximately 14.06% over the last six months, this Zacks Rank #2 stock is an attractive pick. Earnings for this company are expected to grow 9.25% over the next five-year period. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medical – Instruments
The Instruments industry is currently ranked #97. It fell from last week’s #88. The industry has underperformed the S&P 500 by registering a gain of only 0.97% over the past month. The index has gained only 1.94%. In this space, we are bullish on Masimo Corporation (MASI - Free Report) .
Irvine, CA-based Masimo develops, manufactures and markets a family of non-invasive monitoring systems. With a price surge of approximately 27.26% year to date, this Zacks Rank #2 stock is an attractive pick. Earnings for this company are expected to grow 11.10% over the next five-year period.
Medical – Products
The Products industry is currently ranked #174, falling from #161 during last week. The industry has underperformed the S&P 500 by registering a gain of only 1.80% over the past month. The index on the other hand has rose 1.94%%. In this space, we are bullish on Smith & Nephew plc (SNN - Free Report) .
Smith & Nephew, headquartered in London, U.K., 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 19.68% year to date, this Zacks Rank #2 stock is an attractive pick. Earnings for this company are expected to grow 9.09% this year.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>