Written By: Stacy Lawrence
A rising tide lifts all boats–that might be the most oft-repeated cliché to sum up market sentiment in the life sciences for the past few years. Biotech performance has been very, very good for three years, and med tech performance, while nowhere near as stellar, has been on its own upward trajectory as investors look for a safer way to make money in healthcare.
Investors open to the life sciences are looking more to med tech, particularly for IPOs where there have been a slew of recent diagnostic and device filings. There’s a broad perception that the quality of biotech IPOs is becoming more uneven and that medical devices and diagnostics, which have had an almost nonexistent IPO market for years, could provide high-quality alternatives.
More broadly, established med tech companies have also been in line for market gains. For the past three years, the iShares U.S. Medical Device ETF ($IHI) has posted double-digit increases. It added 22% during 2014, following on a staggering 35% for the year prior. An ETF, or exchange traded fund, is a basket of stocks that are bought and sold together under one ticker. This ETF in particular tracks 52 of the biggest medical device and research tools companies.
Its largest holdings include Medtronic ($MDT) (10.39%), Abbott Laboratories ($ABT) (9.89%), Thermo Fisher ($TMO) (7.98%), Covidien ($COV) (7.46%), Baxter ($BAX) (6.38%), Stryker ($SYK) (4.94%), Becton Dickinson ($BDX) (4.83%), Zimmer Holdings ($ZMH) (3.81%), Boston Scientific ($BSX) (3.74%) and Intuitive Surgical ($ISRG) (3.61%).
