Two of the hottest and best performing sectors of the last few years happen to be healthcare and technology stocks. Thanks to a hefty amount of growth, high demand, fat margins and plenty of cash flow generation, both tech and healthcare stocks have surged since the end of the recession. And those growth trajectories seem assured. The question for investors is: which sector has the upper hand and should we choose for our portfolios?
How about both?
There’s a whole ecosystem of tech stocks in the healthcare sector. Dubbed MedTech stocks, these firms feature plenty of innovative muscle. More importantly, they have plenty of growth backing them up. Investors don’t have to sacrifice one sector for the other.
Which MedTech stocks have the goods to power your portfolio? Here are five to buy today.
MedTech Stocks To Buy #1: Intuitive Surgical (ISRG)
When it comes to MedTech stocks, Intuitive Surgical (NASDAQ:ISRG) could be the poster child. The firm was one of the first to dive head-first in robotic-assisted surgery and that head start position is paying great benefits to ISRG shareholders.
Today, more than 4,500 da Vinci Surgical System robots are located in hospitals across the world. And sales continue to grow as patient recovery times and surgeon errors decrease significantly when using one of Intuitive’s systems. ISRG shipped more than 185 systems to hospitals during the first quarter of 2018 — a 39.1% year-over-year gain. At roughly $1.5 million per unit, that’s a lot of coin flowing into ISRG’s pockets.
But Intuitive isn’t done. It’s taking a page out of the traditional tech stocks playbook: grab all the reoccurring revenue opportunities you can. After it’s done selling a da Vinci, doctors need to keep calling-up sales staff for ISRG for instruments. Thanks to Intuitive’s already sizable base of operating robots, recurring sales have turned into a very steady stream of revenues for the MedTech stock — about 71% of Intuitive Surgical’s total revenues. For investors looking for a steady stream of growth, ISRG is a great choice.
MedTech Stocks To Buy #2: Dexcom (DXCM)
It’s no secret that diabetes is becoming a serious pandemic and we’re going to need new solutions to manage the disorder. Leading the way could be mid-cap Dexcom (NASDAQ:DXCM).
A decade ago, DXCM created the first continuous glucose monitor. It was revolutionary at the time and allowed patients to monitor their levels in real time throughout the day. Dexcom has continued to improve on their systems and their latest version — the G6 — doesn’t require finger sticks for calibration. Moreover, the device can be used with any insulin pump and can be viewed via an app on a variety of smartphone and smartwatches.
That approach and first-mover status have allowed Dexcom to see some impressive sales. During the first quarter after the G6 approval, DXCM saw year-over-year growth of 30%. Management is expecting to produce more than $850 million in sales this year.
Shares of MedTech stock have more than doubled since November. But given its growth, the size of the diabetes market and immense buyout potential, Dexcom could rise even further throughout the year.
MedTech Stocks To Buy #3: Veeva Systems (VEEV)
Looking for a more traditional technology pick in the healthcare sector? Then Veeva Systems (NASDAQ:VEEV) is your go-to choice. VEEV is an enterprise software company that uses cloud computing to deliver applications to the life sciences and drug producers. This includes everything from collecting trial data to applications for customer management for pharmaceutical companies.
VEEV is basically Workday (NASDAQ:WDAY) for science.
And that’s a great position to be in. Firms have flocked to the MedTech stocks portfolio of applications. Sales remain swift and revenue jumped a whopping 22% in Q1. Those revenues are expected to keep growing like weeds as demand for real-time healthcare industry data continues to surge. Even better, is VEEV’s fat margins allow it to be profitable. Net income jumped 20% last quarter as well.
All in all, VEEV could be the next big thing in the technology sector. That is, if it doesn’t get bought out first.
Thanks to its leadership position, strong profits and continued growth, Veeva has long been considered a buyout candidate. Several major cloud players have their eye on the firm. Because of that, VEEV shares do trade at a slight premium to the market. But given the growth, that premium is well worth it.
MedTech Stocks To Buy #4: iRhythm Technologies (IRTC)
Like diabetes, heart disease is quickly becoming a huge issue as well. Detecting Arrhythmias and other problems as early as possible leads to better patient outcomes. iRhythm Technologies Inc (NASDAQ:IRTC) is leading that charge.
The firm makes a device called the Zio that is placed on your chest and provides 14 days’ worth of cardiac monitoring. The beauty is that its roughly the size of an iPod shuffle, waterproof and transmits data wirelessly. By using the device, doctors are able to pick-up faint signs of strokes and other cardiovascular problems very early in the process. And thanks to its data collection and analyzation, IRTC is accumulating a huge pool of information to build even better studies and solutions.
To be sure, IRTC is a one-trick pony at this point. But the pony is a very good one. Revenues continue to climb as more doctors realize the benefits of the Zio in their practice. Patients like the device over competitors as it allows people to live normal lives while wearing it. With that, sales are expected to grow further over time.
And let’s not forget IRTC’s market cap remains small at $2 billion. That’s easily swallowable for a larger device marker.
iRhythm is an up-and-comer, but the potential is very big.
MedTech Stocks To Buy #5: Teladoc (TDOC)
Health insurers, benefit managers and consumers are looking for ways to save on healthcare costs. Telemedicine is seen as the next big thing. Patients can fire-up their tablets, PCs or smartphones and speak to a physician in real time.
Teledoc (NASDAQ:TDOC) is the largest player in this growing field — and growing it is.
Thanks to an acquisition of the #2 biggest telemedicine firm — Best Doctors — TDOC saw its revenues more than double during Q1. Organically, the firm saw revenue growth jump by over 47%. These jumps allowed TDOC to post narrower losses per share and beat analyst estimates by a wide margin. TDOC is quickly inching its way towards profitability.
That could help explain why shares are up by more than 87% this year.
But there is more potential ahead. More employers are adding the service to their benefits packages and TDOC has recently made moves to expand into mental health services. Offering the ability to see a psychiatrist from your own couch has huge appeal and could send growth into overdrive. Meanwhile, smart acquisitions of smaller telemedicine players continue to strengthen TDOCs position. All in all, this MedTech stock is quickly becoming the only player in the sector. And a strong one at that.
Disclosure: Author is Long ISRG, TDOC and VEEV.
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