Easily the biggest trend in investing has to be healthcare stocks. From rising and aging populations in the developed world to new middle-class consumers gaining access to healthcare for the first time in emerging markets, healthcare demand is only getting bigger by the day. And there’s plenty of ways to play the mega-trend. However, medical device stocks could be the best.
On the one hand, medical device stocks feature plenty of innovation and high-tech growth. After all, robots conducting surgery and data-recording artificial hearts are pretty exciting products. This sort of innovation makes the sector very tech-like in its returns and profit generation ability. The other hand is benefiting from a relaxed regulatory environment and the suspension of key Obamacare Tax on their bottom lines.
All in all, the combination of the two factors makes the medical device stocks some of best plays in all of healthcare.
With that, here are five medical device stocks with strong outlooks and big-time potential.
Medical Device Stocks With Strong Prognoses: Medtronic (MDT)
Forty-one consecutive years is a lot of time. And that’s just how long Medtronic (NYSE:MDT) has been pumping out rising medical device dividends to its investors.
Since producing a wearable pacemaker back in the 1950s, Medtronic has become a juggernaut and now offers a variety of medical appliances that hospitals need every day. That massive portfolio — covering everything from wound care to cardiovascular products — continues to churn out hefty cash flows and dividend increases. The latest was a juicy 9% jump at the of the summer.
The beauty is that MDT still has plenty of growth left in the tank.
Despite its age and size, Medtronic is still seeing double-digit growth in several of its core divisions. This includes its main coronary and structural heart division. Moreover, Medtronic is knocking it out of the park when it comes to diabetes care. Success with its new MiniMed insulin pump system and forays into continuous glucose monitoring have allowed the medical device stock to reap a 27% revenue gain in the division during the first quarter.
These and other wins at MDT have allowed it to clip an impressive pace of profit expansion. Analysts expect the firm to earn roughly 9% more next year on the pace of its growth.
For investors looking for a great blend of growth and income, Medtronic has to be one of the top medical device stocks on your list. And with a P/E of just 18, it’s also one of the cheapest.
Medical Device Stocks With Strong Prognoses: Mazor Robotics (MZOR)
When it comes to robotic surgery, Intuitive Surgical (NASDAQ:ISRG) is often the go-to name when it comes to medical device stocks. However, there are plenty of upstarts and others operating in different areas of surgery. Take Mazor Robotics (NASDAQ:MZOR) as a prime example.
There’s no room for error in spine and brain surgery. And that’s where MZOR comes in. The firm’s first product was developed to help doctors during these critical moments. Since then, Mazor has refined its offerings and now develops the Renaissance robotic system. This surgical guidance system allows doctors to up their precision even further and “achieve accuracy within 1.5 mm of the intended site on a patient.” That’s a huge win for surgeons doing these critical operations.
It’ll be a huge win for investors as well. Thanks to a distribution partnership with previous pick Medtronic, sales of MZOR’s products increased 25% during the quarter.
However, despite the good news, shares of MZOR recently tanked on the back of a revenue miss. Discounts and lower than expected margins hurt the firm’s numbers and investors were not pleased. But, for forward-thinking investors, this could be a great time to load up on shares of the medical device stock on the cheap.
Medical Device Stocks With Strong Prognoses: Novocure (NVCR)
Both the death of John McCain and Joe Biden’s son brought a lot of attention to glioblastoma multiforme in recent years. But the deadly form of brain cancer could be stopped in its tracks thanks to one of the best performing medical device stocks out there: Novocure (NASDAQ:NVCR).
NVCR developed a treatment called tumor treating fields (TTFields). Patients using the medical device stock’s Optune system place a series of transducers on their heads targeting the tumors. These arrays produce electric fields that start to break down the tumor. The real win is that the Optune system doesn’t affect other cells in a person’s body. That’s one of the major problems with chemo is that hurts healthy cells as well. Results for the system are pretty striking and make a big difference on treatment.
So far, doctors seem to like the system. NVCR managed to book some impressive revenues for being such a small patient population.
But the real winner could be the future. Novocure’s Optune system is only approved for glioblastoma, trials are underway to expand the devices used in other forms of cancer such as lung and ovarian. Those markets are much larger and with NVCR being the only firm doing this kind of work, investors could have a real winner over the longer-term.
It’s no wonder why shares of the stock gained more than 55% this year.
Medical Device Stocks With Strong Prognoses: Becton Dickinson and Co (BDX)
Boring is beautiful when it comes to medical device stocks. And that’s what investors get with leading firm Becton Dickinson and Co (NYSE:BDX). BDX makes everyday products in hospitals and doctors’ offices.
BDX is one of the world’s largest producers of needles, syringes and other sharps-related devices. BDX’s catalog spans everything from diabetes/insulin needles, catheters and vaccines to more complicated fare like regional anesthesia products and drug delivery products. All of these things are designed to be single use, which has doctors and hospitals coming back to BDX every month to re-up their supplies.
This massive portfolio of “boring” got even larger when Becton recently closed on the acquisition of rival Bard. With it, BDX is really the go-to name when it comes to all the medical devices and products hospitals need every day.
The benefits of the buyout are showing up in BDX’s bottom line. Year-over-year revenues jumped by more than 41%, while earnings-per-share saw a big 18% increase. The product portfolios of the two firms really do complement each other so well. With the impressive increases and synergies working, BDX has managed to raise its outlook for the full year.
Given BDX’s long history of raising its dividend — around 10% annually over the last five years — the continued success of the buyout will begin to trickle down to investor’s wallets as well.
Medical Device Stocks With Strong Prognoses: Abiomed (ABMD)
There’s no denying that Abiomed (NASDAQ:ABMD) is a monster when it comes to medical device stocks. The firm’s shares are up a staggering 1,500% over the last five years. And there are plenty of reasons why.
The firm produces the Impella, which is the world’s smallest heart pump. The device is minimally invasive and can be configured in a variety of applications. That fact eliminates many of the risks associated with cardiovascular surgery and because of this, Impella is quickly becoming the standard of care for doctors. The device really is the iPhone of heart devices.
Sales of Impella remain swift. Last year alone, Abiomed managed to see a 33% increase in its sales and 74% jump to its overall profits. Building upon that, ABMD recorded a 36% year-over-year jump in pump sales during its last reported quarter. That’s some torrid tech-like growth. Add in the fact that ABMD would make a killer acquisition target for other heart players like Medtronic or Boston Scientific (NYSE:BSX) and you can see why investors have flocked to shares.
ABMD isn’t cheap at a price-to-earnings ratio of 86. But, it does have plenty of growth backing up that higher multiple. Looking at the longer-term case, that price may seem justified as there still is a long runway for increasing sales/profits.
As of this writing, Aaron Levitt held a long position in BSX, ABMD and ISRG.