February 3, 2023

Health Mettler Institute

Healthy LifeStyle & Education

11 Best Medical Technology Stocks To Buy

In this article, we discuss 11 best medical technology stocks to buy. If you want to see more stocks in this selection, check out 5 Best Medical Technology Stocks To Buy

The global medical devices market is expected to grow from $495.46 billion in 2022 to $718.92 billion by 2029 at a CAGR of 5.5% during the forecast period. Increasing investments in research and development by medical technology firms, combined with favorable policies and regulations, are anticipated to advance the medical device industry over the next few years.

Following the pandemic years, digital healthcare has become indispensable, and the medical technology industry has seen meaningful demand for online medical and AI-powered technology services. Companies in the digital healthcare space have witnessed their stocks rally despite economic turbulence. During the pandemic, seeing the accelerating demand for medtech treatment options, many conventional healthcare companies transformed themselves and offered technology-led health solutions to survive and gain market share. 

Some of the most popular medtech solutions include telemedicine, robotic surgery, medical imaging technologies, wearable medical devices, and AI-led healthcare management options. Investors seeking exposure to the medical technology sector can pick up stocks like DexCom, Inc. (NASDAQ:DXCM), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Danaher Corporation (NYSE:DHR). 

Our Methodology 

We selected the following medical technology stocks based on positive analyst coverage, strong business fundamentals, and market visibility. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm. 

Best Medical Technology Stocks to Buy

11. Stryker Corporation (NYSE:SYK)

Number of Hedge Fund Holders: 34

Stryker Corporation (NYSE:SYK) is a Michigan-based medical technology company that operates through two segments – MedSurg and Neurotechnology, and Orthopaedics and Spine. The company offers implants for use in joint replacements and trauma surgeries. Stryker Corporation (NYSE:SYK) also provides surgical equipment and surgical navigation systems, endoscopic and communications systems, emergency medical equipment, intensive care disposable products, and reprocessed and remanufactured medical devices. 

On December 7, Stryker Corporation (NYSE:SYK) declared a $0.75 per share quarterly dividend, a 7.9% increase from its prior dividend of $0.695. The dividend is payable on January 31, 2023 to shareholders of record on December 30. The dividend yield on December 19 came in at 1.25%. 

Cowen analyst Joshua Jennings on December 14 raised the price target on Stryker Corporation (NYSE:SYK) to $283 from $233 and kept an Outperform rating on the shares. The analyst said the company looks positioned to provide positive 2023 revenue guidance on the back of a strong fourth quarter.

According to Insider Monkey’s data, 34 hedge funds were bullish on Stryker Corporation (NYSE:SYK) at the end of September 2022, compared to 46 funds in the prior quarter. Terry Smith’s Fundsmith LLP is the largest stakeholder of the company, with 5.6 million shares worth $1.14 billion.

Like DexCom, Inc. (NASDAQ:DXCM), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Danaher Corporation (NYSE:DHR), Stryker Corporation (NYSE:SYK) is one of the premier medical technology stocks to consider. 

Diamond Hill Capital made the following comment about Stryker Corporation (NYSE:SYK) in its Q3 2022 investor letter:

“Stryker Corporation (NYSE:SYK) was the only new addition to the portfolio in Q3. It is one of the largest medical device manufacturers with a track record of consistently outgrowing its end markets and competitors. Stryker has a highly performance driven culture with a decentralized operating model that results in strong incentive alignment within the company. We believe the management team has executed well, making small but meaningful decisions that have positioned the firm well among competitors. Management operates with a market share gain mentality and strives to be a category leader in the market they are in. Stryker also benefits from its broad portfolio of surgical tools, small and large cap hospital equipment, waste management products, etc., which enables it to address all the needs of a hospital operating room and be a one-stop shop for health care facilities. This is particularly appealing to hospitals, and it positions Stryker to be the supplier of all operating room equipment versus a single product, thus enabling the company to gain market share.”

10. Inspire Medical Systems, Inc. (NYSE:INSP)

Number of Hedge Fund Holders: 37

Inspire Medical Systems, Inc. (NYSE:INSP) is a Minnesota-based medical technology company focused on the development and commercialization of minimally invasive solutions for patients with obstructive sleep apnea in the United States and internationally. It is one of the best medical technology stocks to invest in. 

On November 1, Inspire Medical Systems, Inc. (NYSE:INSP) reported a revenue of $109.2 million, up 77.0% year-over-year, beating Wall Street estimates by $14.59 million. Inspire Medical Systems, Inc. (NYSE:INSP) raised its full-year 2022 revenue guidance to between $384 million to $388 million, which would represent growth of 65% to 66% over the 2021 revenue of $233.4 million. This compares to the prior revenue guidance of $354 million to $362 million and a Wall Street estimate of $361.29 million.

Goldman Sachs analyst Amit Hazan upgraded Inspire Medical Systems, Inc. (NYSE:INSP) on December 13 to Buy from Neutral with a price target of $308, up from $245. Given “strong visibility” and the company’s “track record of execution,” the analyst sees upside to present consensus and expects “strong” upcoming 2023 guidance. Given multiple compression over the last six months relative to the group, the shares now offer improved better risk/reward, added the analyst, who categorized Inspire Medical Systems, Inc. (NYSE:INSP) as his top Medtech midcap for 2023.

According to Insider Monkey’s data, Inspire Medical Systems, Inc. (NYSE:INSP) was part of 37 hedge fund portfolios at the end of Q3 2022, compared to 31 in the prior quarter. Andreas Halvorsen’s Viking Global held the largest stake in the company, comprising 633,572 shares worth $112.3 million. 

Here is what Alger Capital specifically said about Inspire Medical Systems, Inc. (NYSE:INSP) in its Q2 2022 investor letter:

“Inspire Medical Systems, Inc. (NYSE:INSP) markets the only FDA-approved implantable neuromodulation device used to treat obstructive sleep apnea (OSA). Inspire’s device monitors a patient’s breathing and delivers electrical stimulation to the hypoglossal nerve in order to maintain an open airway.

We believe the second quarter underperformance of Inspire shares is primarily attributable to the rotation away from high-growth, high-valuation health care names that are currently unprofitable. Additionally, we think the underperformance was compounded by Inspire being one of the best-performing medical device stocks in the first quarter. We believe many investors have been “selling the winners” in a risk-off environment. Looking ahead, we continue to believe that Inspire is one of the best growth opportunities in medical devices with no anticipated immediate competition. We also believe its market is highly underpenetrated.”

9. Align Technology, Inc. (NASDAQ:ALGN)

Number of Hedge Fund Holders: 38

Align Technology, Inc. (NASDAQ:ALGN) is an Arizona-based medical device company that designs, manufactures, and markets Invisalign clear aligners and iTero intraoral scanners and services for restorative and aesthetic dentistry. On October 31, Align Technology, Inc. (NASDAQ:ALGN) announced an accelerated stock repurchase agreement with Goldman Sachs to repurchase $200 million of its common stock as part of the $1 billion share repurchase program disclosed in May. The transaction will be funded with cash on hand and is expected to conclude by February 1, 2023. Align Technology, Inc. (NASDAQ:ALGN) is one of the premier medical technology stocks to monitor. 

On October 27, Stifel analyst Jonathan Block maintained a Buy recommendation on Align Technology, Inc. (NASDAQ:ALGN) but lowered the price target on the shares to $265 from $325. Following the company’s Q3 results and guidance, 2022 and 2023 EBITDA and EPS estimates are likely to “come toppling down,” said the analyst. Now, investors “will have to decide if the tables could turn in coming quarters,” noted Block, who added that comps will ease, innovation should improve, and that Align Technology, Inc. (NASDAQ:ALGN)’s market share “seems to be relatively resilient.”

According to Insider Monkey’s data, 38 hedge funds were bullish on Align Technology, Inc. (NASDAQ:ALGN) at the end of September 2022, compared to 33 funds in the last quarter. Brian Bares’ Bares Capital Management is the largest position holder in the company, with 913,324 shares worth over $189 million. 

Here is what Polen Global Growth has to say about Align Technology, Inc. (NASDAQ:ALGN) in its Q2 2022 investor letter:

“Align Technology shares declined significantly during the second quarter when management reported a meaningful deceleration in growth. Management cited a host of challenges, including COVID19 impacts, especially in China with restrictions and lockdowns under their zero-COVID policy, a weaker economic environment, inflationary pressures, supply chain disruptions, and the war in Ukraine, to name a few. Tough comparisons were also a reality — Invisalign case starts in 1Q22 were roughly flat, having lapped the 66% growth from the prior year. It’s not completely surprising that growth is slowing on such tough comparisons, but the company’s shares declined on the news.

By looking at Align’s three-year compound average growth rate (CAGR) to smooth out the ups and downs through COVID, key metrics like Invisalign case shipment, clear aligner revenue, and earnings per share have all grown ~20% during the trailing three years. We think this is quite respectable given the challenges during this period, but the lack of near-term momentum or visibility has not been well received in the current environment. According to our research, Align is the clear market leader, has global scale, a superior product, and still very modest market penetration. While growth may be challenged near term, we remain confident in the long-term growth opportunity.”

8. Veeva Systems Inc. (NYSE:VEEV)

Number of Hedge Fund Holders: 42

Veeva Systems Inc. (NYSE:VEEV) is a California-based company that provides cloud-based software for the life sciences industry in North America, Europe, the Asia Pacific, the Middle East, Africa, and Latin America. The company offers customer relationship management and data management applications for the medical industry. It is one of the premier medical technology stocks to monitor. 

On December 1, Veeva Systems Inc. (NYSE:VEEV) reported a Q3 non-GAAP EPS of $1.13 and a revenue of $552.35 million, outperforming Wall Street estimates by $0.06 and $6.29 million, respectively. Non-GAAP operating income for the third quarter was $219.5 million, compared to $199.4 million a year ago, representing an increase of 10% year-over-year.

KeyBanc analyst Scott Schoenhaus on December 5 maintained an Overweight rating on Veeva Systems Inc. (NYSE:VEEV) but lowered the price target on the shares to $210 from $220 to reflect some multiple impairment as the company works toward moving its CRM business from Salesforce to its Vault Platform when the contract expires in September 2025. The analyst noted the company posted a strong quarter with top and bottom-line beats, but guided slightly below expectations on Q4 billings, revenue, and operating profits.

According to Insider Monkey’s third quarter database, 42 hedge funds were long Veeva Systems Inc. (NYSE:VEEV), compared to 45 funds in the prior quarter. Greg Poole’s Echo Street Capital Management is the largest position holder in the company, with 899,876 shares worth $148.3 million. 

Here is what Artisan Partners specifically said about Veeva Systems Inc. (NYSE:VEEV) in its Q2 2022 investor letter:

“Veeva Systems Inc. (NYSE:VEEV) is one of the highest quality franchises in our portfolio. The company has the dominant CRM platform for pharmaceutical sales and marketing organizations, and it is replicating that success with the rollout of numerous other modules focused on pharmaceutical customers’ manufacturing, quality, safety and clinical operations. Growth has temporarily slowed over the past year as the company laps difficult YoY comparisons caused by the rapid adoption of their virtual sales call solution during the pandemic. Several large deals also encountered unexpected delays in late 2021. Despite these short-term headwinds, we remain confident in Veeva’s future growth prospects and high-quality business model (~40% free cash flow margins supported by largely recurring subscription revenues). Meanwhile, we believe the defensive nature of its end market (health care) and strategic importance of cloud IT driven transformations could help buffer the company against a weaker global economy. As shares declined in Q2 along with other software stocks, we added to our position.”

7. Bio-Rad Laboratories, Inc. (NYSE:BIO)

Number of Hedge Fund Holders: 45

Bio-Rad Laboratories, Inc. (NYSE:BIO) is one of the best medical technology stocks to consider buying. The California-based company manufactures and distributes life science research and clinical diagnostic products in the United States, Europe, Asia, Canada, and Latin America. Bio-Rad Laboratories, Inc. (NYSE:BIO) focuses on selected segments of the life sciences market such as proteomics, genomics, biopharmaceutical production, cellular biology, and food safety. It is one of the leading medical technology stocks to buy. 

On December 6, RBC Capital analyst Conor McNamara initiated coverage of Bio-Rad Laboratories, Inc. (NYSE:BIO) with an Outperform rating and a $565 price target. He believes shareholders will benefit from “an extended period of multiple expansion” as the company continues to deliver revenue acceleration and margin improvement. The stock trades at a 60%-70% discount to peers and with $200 per share in cash and investments has “the most balance sheet optionality of any company in our sector,” the analyst noted.

According to Insider Monkey’s data, 45 hedge funds were bullish on Bio-Rad Laboratories, Inc. (NYSE:BIO) at the end of the third quarter of 2022, compared to 43 funds in the prior quarter. Israel Englander’s Millennium Management is the biggest position holder in the company, with 458,645 shares worth $191.3 million. 

6. Medtronic plc (NYSE:MDT)

Number of Hedge Fund Holders: 55

Medtronic plc (NYSE:MDT) develops, manufactures, and commercializes device-based medical therapies to healthcare systems, physicians, clinicians, and patients worldwide. The company operates through Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes Operating Unit segments. On December 8, Medtronic plc (NYSE:MDT) declared a quarterly dividend of $0.68 per share, in line with previous. The dividend is payable on January 13, 2022 to shareholders of record on December 21. The dividend yield on December 19 came in at 3.55%. 

On November 30, Wells Fargo analyst Larry Biegelsen maintained an Equal Weight rating on Medtronic plc (NYSE:MDT) and trimmed the firm’s price target on the shares to $77 from $82. The analyst updated his 2024 and forward EPS forecast for Medtronic plc (NYSE:MDT), as he factored in the FX impact on EPS.

According to Insider Monkey’s third quarter database, 55 hedge funds were bullish on Medtronic plc (NYSE:MDT), compared to 54 funds in the earlier quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest stakeholder of the company, with 7.16 million shares worth $578.30 million. 

Like DexCom, Inc. (NASDAQ:DXCM), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Danaher Corporation (NYSE:DHR), Medtronic plc (NYSE:MDT) is one of the best medical technology stocks to invest in. 

Here is what Artisan Partners specifically said about Medtronic plc (NYSE:MDT) in its Q2 2022 investor letter:

“While Medtronic plc (NYSE:MDT)’s procedure volumes recovered to pre-COVID levels, foreign exchange headwinds overshadowed underlying business value growth, and supply chain issues, including those related to China’s lockdowns, impacted the surgical innovations business. The downdraft in the market during the quarter led to a pile-on. We are being patient with our investment in Medtronic because the company continues to be a strong free cash flow generator and is attractively priced, with a FCF yield of 5% on trailing one-year numbers and a dividend yield of 3%. Medtronic is under new management that is focused on growing the company’s top line, reinvesting in R&D, returning cash to shareholders and growing operating profits. We like new management’s strategy and believe new product launches, increased surgery visits, sound M&A transactions and a shareholder returns focus, should reinvigorate the business. We added to our positions in these health care names during the quarter.”

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Disclosure: None. 11 Best Medical Technology Stocks To Buy is originally published on Insider Monkey.