This article was originally published on ETFTrends.com.
Medical device stocks and the related ETFs are among the brightest spots in the broader healthcare sector this year. iShares U.S. Medical Devices ETF (IHI) , the largest dedicated medical devices exchange traded fund, entered Thursday with a year-to-date gain of almost 15%.
Industry observers argue that medical technology companies can tap into increased healthcare spending among emerging economies while the U.S. market has matured and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
Some analysts, including Bernstein's Lee Hambright, remain bullish on medical device manufacturers.
“He argues that innovation is 'alive and well' in medical technology, from robotics to miniaturization, which is reinvigorating growth, even in mature markets,” reports Teresa Rivas for Barron's. “That said, he prefers companies that have depth in a single field, rather than those that are spread across a number of areas, as winning strategies vary by segment.”
Other Catalysts for Healthcare ETFs
For healthcare ETFs, the good news is that the U.S. economy moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as health care.
“Hambright likes that margins are 'strong, steady, and expanding,' as volume and innovation offset pricing pressures,” according to Barron's. “Then, of course, there are macro tailwinds, including an aging global population and expanding middle class and maturing medical care in emerging markets. While reimbursement pressure is an issue for some, he doesn't think this, or policy changes, will hurt growth going forward.”
The $2.34 billion IHI recently turned 12 years old. IHI tracks the Dow Jones U.S. Select Medical Equipment Index. The ETF holds 56 stocks, including Medtronic Plc (MDT), Abbott Laboratories (ABT) and Thermo Fisher Scientific (TMO).
IHI charges 0.44% per year, or $44 on a $10,000 investment.
For more information on the healthcare sector, visit our healthcare category.
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