Bellevue Medtech & Services

US jobs data remained weak in September. Meanwhile, core inflation data was unchanged month-on-month, despite widespread investor expectations that the recently imposed import tariffs would lead to an uptick in inflation. Against this backdrop, the US central bank lowered the target range for its overnight lending rate by 0.25 percentage points to 4.00-4.25%, its first cut this year.

The broad stock market advanced +2.7% in the month under review. The healthcare sector (+0.5%) also closed higher, however was less strong. Medtech stocks (-2.9%) were weaker in comparison. The Bellevue Medtech & Services Fund (-3.1%) ended the month broadly in line with the benchmark performance.

Medtech names such as EssilorLuxottica (+6.1%), Hoya (+5.3%), Masimo (+5.1%), Medtronic (+2.9%) and Abbott (+0.5%) made positive contributions to absolute performance. EssilorLuxottica, together with Meta, launched new smart glasses, including a model with a screen embedded on the lower part of the right lens. EssilorLuxottica also announced FDA approval of its eyeglass lens for myopia control, Stellest, in September, earlier than the initially expected decision date of year-end 2025. Masimo announced in September that it was broadening its strategic partnership with Philips, in a move that would intensify their collaboration and, in particular, accelerate the integration of Masimo’s monitoring solutions into Philips’ patient monitors.

Last month, investors sold off innovative large-cap medtech growth stocks such as Boston Scientific (-7.9%), Intuitive Surgical (-5.9%), Stryker (-5.8%) and Edwards Lifesciences (-4.8%) and shifted into leading pharma- and biotech stocks instead. Sentiment in the latter market segments brightened on hopes that an agreement on drug prices would soon be reached with the Trump administration. We view the shift as a short-lived move; The medtech sector should already benefit mid-October with the start of the third-quarter earnings season which we think should provide solid fundamentals.

The diabetes management companies Dexcom (-11.1%) and Insulet (-9.6%) also detracted from performance. Insulet guided for better-than-expected sales growth for the third quarter, however without providing any further details. Meanwhile, worries about new competitors entering the market with patch pumps for insulin delivery caused some investors to sell the stock. The cost-effective mass production of such systems is often underestimated, which is why we think the recent selling was an overreaction. Dexcom sold off on rumors of lacking accuracy of its G7 CGM, which we think is unjustified.

Performance drivers in healthcare services were health tech specialist Veeva Systems (+10.1%), the three US health insurers Centene (+22.3%), UnitedHealth (+10.9%) and Molina (+5.3%), and the two hospital groups Tenet Healthcare (+9.6%) and HCA Healthcare (+5.2%). According to UnitedHealth, about 78% of its Medicare Advantage members will be enrolled in plans with at least four stars in 2027. This is in line with the figure for the previous year and much higher than many investors had expected. Veeva Systems announced that two more top 20 biopharma firms, Gilead Sciences and Bristol-Myers Squibb, had signed on to its new Vault CRM platform.

Judging by the pleasing second-quarter results published by medtech companies and our talks with numerous medtech executives at the Wells Fargo Healthcare Conference in Boston in September, we expect solid volume growth in surgical procedures during the third and fourth quarters of 2025. We also expect very positive developments in 2026. The currently record-high valuation discount vs. Wall Street and low valuations that were last seen during the height of the pandemic are additional arguments for investing in the Bellevue Medtech & Services (Lux) fund. Furthermore, there are already signs that M&A activity is gaining momentum and that large-cap companies are using their strong balance sheets to fund additional acquisition-led growth. The most important factor for success over the long run is the approval and subsequent launch of relevant new products that generate high sales growth. Examples here are Abbott’s Lingo, Libre Rio, Libre 3, TriClip and AVEIR products, Boston Scientific’s Farapulse PFA system and Watchman FLX Pro device, and the new da Vinci 5 surgical robot from Intuitive Surgical.