Medical Devices Stocks Are in Rude Health

By Charley Grant (WSJ)

When earnings season begins in earnest this week, health-care investors will be relying on pacemakers and artificial knees.

The S&P 500 Health Care Sector index has returned about 4% so far this year. That is the second-worst performing sector over that period and significantly lags behind the overall market. Policy uncertainty driven by the 2020 elections has held back insurance and hospital stocks, while pharmaceuticals manufacturers have struggled with slowing top-line growth and clinical-trial disappointments.

Medical-device stocks, however, have been a significant bright spot. Cardiovascular specialist Edwards Lifesciences has rallied nearly 50% so far this year. Stryker Corp. , which focuses on orthopedics, is up about 35%.

There are good reasons behind the outperformance. Important technological advances in diabetes care have buoyed sales for Abbott Laboratories ABT +0.24% and DexCom, while breakthrough clinical data in noninvasive heart-valve replacement from earlier this year has lifted Edwards and Medtronic. Large companies with double-digit sales-growth rates aren’t hard to find in the sector.

 

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