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4 MedTech Stocks to Enrich Your Portfolio Ahead of Q3 Earnings

Trina Mukherjee
·4 min read

With the COVID-19 pandemic not showing any signs abating, uncertainty has become the order of the day with people and the global economy bearing the brunt of it. In fact, the U.S. economy witnessed the sharpest contraction (32.9%) of gross domestic product (GDP) in the second quarter since the Great Depression. There has also been a resurgence in cases in several regions of the United States. These factors are likely to aggravate the market volatility further.

Although economists at S&P Global Ratings have projected an increase of 18-22% in GDP in the third quarter, the International Monetary Fund’s revised 2020 projection of 8% decline in U.S. GDP paints a gloomy picture for the country’s economy.

Moreover, the fate of the new coronavirus relief package is getting uncertain with each passing day especially since the initial $2.2-trillion stimulus bill got rejected. And now as Nancy Pelosi (U.S. House speaker) has rejected the $1.8 trillion proposal stating that the package does not deliver when it comes to demands arising from the pandemic and the recession, the passing of COVID-19 relief package before elections seems a distant possibility. Further, markets tumbled as the big drug companies put a pause on their vaccine trials, thereby making investors increasingly jittery.

Amid this mayhem, the MedTech space, which showed significant resilience during the first half of the year, can become a safe haven for investors ahead of the upcoming earnings season.

MedTech: A Safe Space for Investment

Despite the pandemic-led supply disruption, postponement of elective and non-critical procedures (creating a dent on MedTech sales), and delays in ongoing and prospective clinical trials and product approvals in the first half of 2020, MedTech emerged somewhat unscathed amid the volatile market.

In fact, notable players from this space have displayed impressive performance and countered the market meltdown on the back of the nature of their businesses that align well with COVID-19-related healthcare needs. Not just this, many MedTech makers, which suffered huge business loss due to procedure deferrals in initial pandemic phase, have already started to show signs of rebound across their businesses as even non-emergency medical procedures cannot be deferred endlessly. The signs of rebound are expected to be more prominent in the to-be-reported quarterly results.

4 Impressive MedTech Stocks to Add to Your Portfolio

Though the current pandemic-induced market mayhem has kept investors on tenterhooks, they can put their bets on the MedTech space, which is likely to yield benefits during the upcoming earnings season and possibly beyond.

To narrow down the list, we have selected four stocks with a VGM Score of A or B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential.

ResMed Inc. RMD witnessed significantly increase in demand for its critical care products amid this public health crisis and consequently has been scaling up production of ventilators, masks and other respiratory devices since March. According to management, its flagship ventilator — the Astral life-support ventilator — reached a peak of over five times the company’s weekly production rates during fourth-quarter fiscal 2020. Further, ResMed anticipates that the demand for its ventilators will continue to be strong even in the post-pandemic situation as few patients who have recovered from the coronavirus infection may suffer from lung damage, thus requiring long-term ventilator support. This, in turn, boosts investors’ confidence in the stock. Over the past five years, the company’s earnings growth rate is 13.1%, compared with the industry’s 7.5%.

Shares of this Zacks Rank #2 company, with a VGM Score of B, have gained 14.8% on a year-to-date basis compared with the industry’s growth of 0.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Click to get this free report DaVita Inc. (DVA) : Free Stock Analysis Report Owens Minor, Inc. (OMI) : Free Stock Analysis Report ResMed Inc. (RMD) : Free Stock Analysis Report LHC Group, Inc. (LHCG) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research