MedTech Lifts S&P 500 Index: 3 Stocks With Upside Potential
Mid-pandemic market highs do not come as a surprise any more. As coronavirus cases show no signs of declining, these benchmark highs are often tech driven or the result of external stimulus. The latest uptrend however was driven by an industry that is generally not in the limelight from an investment perspective.
We are talking about the MedTech space to be precise. On Aug 19, the S&P 500 Index surpassed its earlier peak (reached on Feb 19) by 0.11%. The gain was all the more prominent considering the fact that the index had touched a record low on Mar 23 and took the shortest time in history to regain.
Amid the coronavirus-jeopardized market, this performance undoubtedly came as a surprise for market watchers.
Delving deeper, it has been seen that along with the bigwig tech drivers, MedTech stocks played a major role in holding the index up and ending the shortest bear run in the history of S&P 500. A number of S&P 500 stocks from this sector moved up by more than 50% since Mar 23 till Aug 19, ahead of the index’s gain of 49.8%. All thanks to an innumerable number of COVID-19 related developments that provided an impetus to MedTech stocks.
MedTech Stocks Driving the Index
Abbott Laboratories ABT, based on its efforts to progress in the area of diagnostic testing for Covid-19, has gained 59.5% between Mar 23 to Aug 19. Till its second-quarter earnings call in late July, the company sold about 40 million tests across all its platforms globally.
Thermo Fisher Scientific TMO rose as much as 64.8% in this period, primarily banking on its remarkable breakthrough in coronavirus testing. The company’s real-time PCR test has got FDA’s EUA as well as CE mark in the European Union. Further, in terms of the development of therapeutics and vaccines, Thermo Fisher is partnering with a number of pharma and biotech customers who are working on coronavirus-related projects.
Other than these, Abiomed ABMD rose 137.5% in this period. The company’s Impella RP attained the FDA’s EUA for treating COVID-19-related right heart failure or decompensation, including pulmonary embolism (PE).
Varian VAR registered a colossal 92.6% improvement in stock price in this period. Within the company’s oncology segment, the Noona software application offers cancer care teams in-app features such as patient screening, real-time symptom reporting, secure care team messaging, telephone triage workflow automation, and patient access to medical records, making it easier to access the services amid the coronavirus pandemic.
S&P 500 Price Comparison From Mar 23 to Aug 19
We note that with increased federal stimulus getting channelized in the field of advance R&D for critical care support, and COVID-19 tests and vaccines, a higher number of non-S&P Medtech stocks too showed an uptrend through the first half of 2020.
What Lies Ahead?
The fate of MedTech firms is largely dependent on their nature of business. Going ahead, their business will depend on whether these companies provide products that are used for non-deferred and non-elective procedures or for COVID-19 related healthcare support.
Our Choices
Here we pick companies with closing price less than $100. These stocks have moved up more than 50% from Mar 23 to Aug 19 attributable to their situation-based strategic developments. These stocks currently hold a Zacks Rank #1 (Strong Buy) or #2 (Buy).
QIAGEN N.V. QGEN: The company registered strong sales growth trends in consumables and related revenues in the second quarter of 2020 on robust demand for COVID-19 solutions. The company developed and launched the latest QIAstat-Dx Respiratory SARS-CoV-2 Panel, which is a syndromic testing solution designed to differentiate coronavirus from 21 other respiratory pathogens. The stock currently carries a Zacks Rank #2 and has risen 51.7% over the said period, outpacing the S&P Index. The stock’s long-term expected earnings growth rate is an impressive 22.3%.
Price Performance
Merit Medical Systems MMSI: It is an interventional cardiology and electrophysiology player. Despite COVID-19, the company is witnessing robust demand for several of its critical care products, such as hemodynamic monitoring, peritoneal dialysis catheters and insertion tools apart from its infection control products. The stock too carries a Zacks Rank #2 and has rallied 54.2% over the said time frame. The stock’s long-term historical earnings growth rate is pegged at 13.1%.
OPKO Health OPK: With respect to COVID-19 response efforts, the company has built a specific expertise in offering testing to over 30 drive-through sites around the country. The next step in this diagnostic journey with respect to the pandemic will be antibody and serology testing in addition to the ongoing PCR testing. OPKO Health has started to offer COVID-19 antibody blood testing on a nationwide basis from the end of April.
This Zacks Rank #2 stock has surged 235.3% in the said time frame. The stock’s long-term expected earnings growth rate is pegged at 12%.
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ABIOMED, Inc. (ABMD) : Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
QIAGEN N.V. (QGEN) : Free Stock Analysis Report
Abbott Laboratories (ABT) : Free Stock Analysis Report
Varian Medical Systems, Inc. (VAR) : Free Stock Analysis Report
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
OPKO Health, Inc. (OPK) : Free Stock Analysis Report
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