Top-Performing Medical Equipment Stocks Predicted for 2024
In the vast medical device market, which surpasses $500 billion and is predicted to reach almost $890 billion by 2032, it's no wonder numerous investors are drawn towards medical device stocks. These stocks represent shares of companies that engross in crafting and selling medical devices, which can encompass various appliances, tools, or machinery used for diagnosing, treating, or preventing diseases and conditions. This extensive category includes both physical devices like defibrillators and software, implants, and chemical reagents, among others.
This text will delve into the definition of medical device stocks and highlight several notable picks in the market. Additionally, it will address a few top medical device ETFs.
Definitions
Medical Device Stocks
Medical device stocks refer to shares of companies that specialize in manufacturing and selling medical devices. These devices encompass a vast array of objects, instruments, and equipment used to diagnose, treat, or prevent diseases and medical conditions. Software, implants, and chemical reagents accompanied by their intended purposes also fall under this umbrella.
The World Health Organization estimates that today's market boasts roughly 2 million different types of medical devices.
Top Picks
Outstanding Medical Device Stocks in 2024
There are an abundance of promising medical device stocks for potential investors to explore. Five high-performing choices at present are Abbott Laboratories, InMode, Intuitive Surgical, Johnson & Johnson, and Outset Medical.
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1. Abbott Laboratories
Abbott Laboratories, as a major company, focuses on the production of medical devices while also operating substantial business segments in pharmaceuticals, diagnostics systems, and nutritional products. During the COVID-19 pandemic, rapid diagnostic tests provided a substantial boost to the company's revenue. Although the overall demand for these tests later subsided, Abbott's core business remains robust.
Specifically, Abbott's FreeStyle Libre, the leading CGM device globally, has seen noteworthy growth in sales. This device holds particular appeal for income investors due to Abbott's 52 consecutive years of dividend increases, making it a Dividend King.
2. GE Healthcare Technologies
Following its separation from General Electric in 2023, GE Healthcare Technologies has continued excelling as a leader in the medical device market. With four primary business segments — imaging, ultrasound, patient care solutions, and pharmaceutical diagnostics — medical imaging represents a significant revenue generator for GE Healthcare, constituting over half of the company's overall revenue.
Like its contemporaries, aging populations worldwide should serve as a tailwind propelling higher demand for GE Healthcare's products, ultimately benefiting its bottom line. The company's history of innovation and robust annual research and development investment further fortify its position in the market.
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3. Intuitive Surgical
Intuitive Surgical, known for pioneering minimally invasive surgical systems, has seen endorsement for its flagship da Vinci surgical system. The device was originally approved for general laparoscopic surgery, but it now supports a wide array of procedures. More than 15 million procedures have been facilitated using da Vinci systems as of 2023, with over 2.2 million performed in the same year. With slightly over 9,800 units installed in hospitals worldwide, this technological breakthrough has revolutionized the medical field.
Although Intuitive Surgical experienced a temporary slowdown due to the COVID-19 pandemic, its procedure volumes have shown consistent growth. The company's reliance on recurring revenue from the sale of replacement instruments contributes to its revenue growth. As aging populations drive increased demand for surgical procedures, the company is well-positioned to capitalize on this opportunity, while also continuing to upgrade its robotic surgical systems.
4. Johnson & Johnson
One of the biggest medical device manufacturers worldwide, Johnson & Johnson's medical device segment includes various devices such as catheters, implants, robotic surgical systems, and wound closure products. In addition to its medical device offerings, the company is also highly regarded for its prescription drugs.
To further expand its medical device business, Johnson & Johnson has been actively pursuing acquisitions. Acquiring prominent medtech companies like Abiomed and Verb Surgical has bolstered the company's presence in the medical device industry.
5. TransMedics Group
TransMedics Group, a small-cap company, deploys innovative devices to support organ transportation, benefitting donor organs during transport. The Organ Care System (OCS) enhances the donor organ preservation process, increasing the number of available organs for transplantation. By substantially reducing post-transplantation complications, the OCS can greatly improve medical outcomes.
This significant medical gap presents a fantastic chance for TransMedics. The company's exclusive nationwide air fleet, dedicated solely to transporting donor organs, sets it up well to capitalize on this opportunity.
TransMedics anticipates revenue growth to surge around 80% in 2024. The organization is already profitable, with its financial outlook showing continuous improvement.
Medical Device Index Funds
Medical Device Index Funds
For investors looking to purchase a collection of medical device company shares, there are various medical device index funds to consider, including the iShares U.S. Medical Devices ETF (IHI -0.8%), SPDR S&P Health Care Equipment ETF (XHE -0.62%), and First Trust Indxx Medical Devices ETF (MDEV -1.36%).
1. iShares U.S. Medical Devices ETF
The iShares U.S. Medical Devices ETF is administered by BlackRock (NYSE:BLK). This ETF invests only in U.S. medical device companies. The fund’s annual expense ratio is 0.4%.
IHI currently holds shares in 50 companies. Its top holdings include Abbott Laboratories, Intuitive Surgical, Stryker (SYK -0.12%), Boston Scientific (BSX -0.34%), and Medtronic (MDT -0.3%).
2. SPDR S&P Health Care Equipment ETF
The SPDR S&P Health Care Equipment ETF is managed by State Street (STT -0.15%). It invests in healthcare equipment and healthcare supply companies, which includes numerous medical device companies. The ETF’s annual expense ratio is 0.35%.
XHE currently holds shares in 65 companies. Its top holdings include Omnicell (OMCL 0.11%), ICU Medical (ICUI -2.38%), Lantheus Holdings (LNTH 1.21%), UFP Technologies (UFPT -3.87%), and Atricure (ATRC -3.42%).
3. First Trust Indxx Medical Devices ETF
The First Trust Indxx Medical Devices ETF is managed by First Trust Portfolios. This ETF invests in medical device companies based in both the U.S. and other countries. Its annual expense ratio is 0.70%.
MDEV currently holds shares in 49 companies. Its top holdings include Koninklijke Philips (PHG 0.62%), Globus Medical (NASDAQ:GMED), ResMed (RMD -1.65%), Smith & Nephew (SNN 0.0%), and Hoya (HOCPY -1.11%).
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Should you invest in medical device companies?
As with most investment inquiries, the most appropriate response to whether you should invest in medical device companies is: It depends. Every investor has various objectives, risk appetites, and timelines.
Medical device stocks may decline during economic downturns as healthcare providers reduce spending. They also experience volatility due to government and private payer reimbursement decisions. Investors with short time horizons and/or modest risk tolerance levels should give these factors close consideration.
However, the long-term prospects for the medical device industry appear to be quite promising. An aging population and technological advancements should provide positive tailwinds for the medical device industry. For long-term investors who can tolerate potential volatility, medical device stocks offer an attractive prospect.
Keith Speights has positions in Intuitive Surgical. Our Website has positions in and recommends Abbott Laboratories, InMode, Intuitive Surgical, Kenvue, Outset Medical, ResMed, and TransMedics Group. Our Website recommends GE HealthCare Technologies, Johnson & Johnson, Medtronic, and Smith & Nephew Plc and recommends the following options: long January 2026 $13 calls on Kenvue, long January 2026 $75 calls on Medtronic, and short January 2026 $85 calls on Medtronic. Our Website has a disclosure policy.
Investors interested in diversifying their portfolio can consider investing in medical device ETFs, such as the iShares U.S. Medical Devices ETF (IHI), SPDR S&P Health Care Equipment ETF (XHE), and First Trust Indxx Medical Devices ETF (MDEV). These funds offer a collection of shares from various medical device companies, providing investors with exposure to this growing sector.
Furthermore, finance plays a crucial role in the medical device industry. Companies need to secure sufficient funding to finance research, development, and production of innovative devices. Investors looking to finance these innovative companies can explore various finance options, such as venture capital, private equity, or initial public offerings (IPOs). These sources of funding enable young companies to grow and establish a presence in the medical device market.
