Medtech: Strong operating performance, overlooked by investors

Medtech valuations and operating prospects are attractive enough to support a sector recovery as investors rotate away from expensive technology stocks.

• The sector trades at around 18 times forward earnings and at a discount of about 5% to the S&P 500, versus its historical premium of roughly 15–20%.
• Medtech rose 2.3% in the third quarter of 2026, ahead of the Nasdaq 100’s 0.6%, although a sustained recovery will require companies to deliver on their growth prospects.
• Bellevue expects the companies in its Medtech & Services portfolio to generate average annual revenue growth of about 8% and EPS growth of about 13% through 2030; large caps represent more than 97% of the portfolio.
• Growth opportunities include renal denervation for hypertension, continuous sensors for potassium monitoring, AI-assisted diagnostics, new imaging tracers and surgical robotics, while reimbursement remains a key constraint.
• Demand is supported by ageing demographics, with the first baby boomers turning 80 in 2026, while regulatory barriers and domestic pricing pressure limit the extent to which Chinese medtech competition can be extrapolated from other industries; acquisitions by Boston Scientific, Abbott and Danaher illustrate continued consolidation.

Takeaway: Investors should consider established, innovative medtech companies, particularly in the US, but should prioritise business quality and execution rather than investing solely on takeover expectations, with reimbursement, healthcare funding and competition remaining important risks.