One positive spin we can put on the “great growth stock bear market of 2022” – which, let’s face it, is what we are dealing with so far this year – is the value being created for future portfolio returns.
We have seen indiscriminate selling in many high-growth areas of the market over the first 2 months of this year. While that is understandable given the geopolitical and monetary policy backdrop, neither of those factors represent a long-term dynamic with real implications for investor outcomes over the next decade.
Many growth stocks have seen declines of 40, 50, 60, or even 70% among companies with very viable long-term strategies and unique value propositions.
It may be time now for serious investors to have their shopping lists filled out and close at hand.
One theme that could represent an overlooked but intriguing opportunity is the medical device space. We have made extraordinary advances in technology solutions that solve health problems and promote rising quality of life with reduced reliance on potentially dangerous drugs over recent years. And stocks in the space that have real IP in play are – make no mistake – dealing in solutions directly applicable to multi-billion-dollar markets with little cyclicality.
In other words, medical devices sit at the sweet spot between growth potential and recession resistance so sought after by institutional money managers. Hence, a bargain sale in that space could be a rare and ideal low-risk, high-return opportunity.
Given this backdrop, we take a close look below at a few stocks in the medical device space that could turn into portfolio all-stars during this historic growth stock correction.
Medtronic PLC (NYSE:MDT) trumpets itself as a company that develops, manufactures, distributes, and sells device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide.
It operates through four segments: Cardiac and Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group, and Diabetes Group.
Medtronic PLC (NYSE:MDT) recently announced approval of the Ontario government’s announcement of a comprehensive reimbursement program for continuous glucose monitoring (CGM) for eligible residents living with type 1 diabetes (T1D). CGM devices provide critical information on glucose levels to help with the management of diabetes. Medtronic fully supports this investment in the health of Ontarians living with diabetes, enabling access to innovative diabetes management technology to help improve control of this very challenging chronic disease.
“This is a real game-changer,” said Tori Lowe, 20. “Before I had to wake up several times a night to check my levels and now I won’t have to. I already use a Medtronic pump, so now their CGM system can be integrated into my treatment plan. I can have more choice, more peace of mind, and I can order everything in one place. This will make a world of difference to help Canadians like me living with diabetes.”
Even in light of this news, MDT hasn’t really done much of anything over the past week, with shares logging no net movement over that period. Shares of the stock have powered higher over the past month, rallying roughly 2% in that time on strong overall action.
Medtronic PLC (NYSE:MDT) managed to rope in revenues totaling $7.8B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -0.2%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($11.2B against $8.9B).
Electromedical Technologies Inc. (OTC US:EMED) produces the WellnessPRO-Plus device, a self-administration tool for bioelectronic medical treatment of chronic pain that holds the potential to replace opioid-based treatments, offering hope to millions of people and stalling the epidemic of addiction, overdose, and suicide that has plagued society over the past decade. It is now working toward commercializing its new WellnessPro POD prototype device as a next-generation product with significant advances.
The company recently put out a shareholder letter pointing to its under-the-surface accomplishments last year, including improvements to its financial position through significant reductions to outstanding variable convertible debt and obtaining an equity line of credit at favorable terms with the scale needed to drive core product R&D. Now, EMED appears to be ramping up its commercial potential even as shares get cheaper.
Electromedical Technologies Inc. (OTC US:EMED) most recently put out news that it has hired its first Business and Sales Development Director, David Orn, to drive a material expansion of sales and strategic distribution channels for Electromedical’s flagship Wellness Pro Plus next-generation therapeutic device.
“I couldn’t be more excited to join the Electromedical team,” stated Mr. Orn. “I see this opportunity as a way to contribute to an enthusiastic, forward-thinking, fast-moving company set to revolutionize the medical device space. I have been consistently impressed by the culture and leadership at Electromedical. CEO Matthew Wolfson and CIO Petar Gajic have demonstrated humility, expertise, drive, and an upbeat attitude that is infectious. I believe that Bioelectronics and Electroceuticals will have a huge impact on medicine and the opioid crisis. Electromedical Technologies is perfectly positioned to address the growing demand for self-care and drug free therapies that help people relieve chronic pain and improve quality of life. I have been searching for an opportunity with a company involved in such exciting and innovative work that makes a positive difference in people’s lives. And I feel confident at this point that I’ve found it.”
While shares have been sliding, long-term investors may want to look around the corner with this stock given its potentially market-leading technology for pain treatment solutions that can help us win the battle against harmful drugs.
Electromedical Technologies Inc. (OTC US:EMED) CEO Matthew Wolfson noted, “David is the perfect addition to our equation right now. We have low-hanging fruit on the vine and a great deal of potential in place just waiting to be tapped by someone with his caliber of experience and talent. We are confident David will help us achieve our fundamental targets over the coming year and for years to come, and we welcome him with open arms as we focus on achieving our fundamental milestones in the quarters ahead. We have a number of fresh catalysts on tap, and we look forward to providing additional details in coming communications.”
Novocure Ltd. (Nasdaq:NVCR) is a global oncology company working to extend survival in some of the most aggressive forms of cancer through the development and commercialization of its innovative therapy, Tumor Treating Fields.
Novocure’s commercialized products are approved in certain countries for the treatment of adult patients with glioblastoma and malignant pleural mesothelioma. Novocure has ongoing or completed clinical studies investigating Tumor Treating Fields in brain metastases, gastric cancer, glioblastoma, liver cancer, non-small cell lung cancer, pancreatic cancer, and ovarian cancer.
Novocure Ltd. (Nasdaq:NVCR) recently announced that Yoram Palti, Novocure’s Founder and Chief Technology Officer, has been selected to receive the 2022 Israel Prize in the field of entrepreneurship and technological innovation.
“Professor Palti demonstrated great courage as he pursued a truly novel approach to cancer treatment,” said Asaf Danziger, Novocure’s CEO. “We are proud that he is being recognized for his commitment to scientific innovation and his impact on patients and families around the world.”
The stock has suffered a bit of late, with shares of NVCR taking a hit in recent action, down about -14% over the past week. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -4%.
Novocure Ltd. (Nasdaq:NVCR) has a significant war chest ($938.5M) of cash on the books, which must be weighed relative to about $142.6M in total current liabilities. One should also note that debt has been growing over recent quarters. NVCR is pulling in trailing 12-month revenues of $535M. However, the company is seeing declines on the top-line on a quarterly y/y basis, with revenues falling at -7.5%.
Other interesting stocks in the medical device space include Zynex Inc. (Nasdaq:ZYXI), electroCore Inc. (Nasdaq:ECOR), Tivic Health Systems Inc. (Nasdaq:TIVC), Zimmer Biomet Holdings Inc. (NYSE:ZBH), and Intuitive Surgical Inc. (Nasdaq:ISRG).
