7 Medical Products Stocks With the Right Prescription for Gains

With high-tech advances, many of today's medical products straddle both the healthcare and the technology sectors. From implants to pumps and dialysis to oxygen therapy devices, several MoneyShow.com contributors highlight their top picks in the fast-growing medical products market. Douglas Gerlach, SmallCap Informer Sufferers of chronic obstructive pulmonary disease, asthma, lung disease, or asthma typically receive oxygen therapy at home through stationary oxygen concentrators and metal oxygen tanks. Inogen, Inc. markets portable oxygen concentrators (POCs) that can weigh less than six pounds, depending on batteries, and run for between five and 13 hours. Users can employ the device overnight as well. The company's three main devices sell for $2,300-$2,400. But the POC market is highly competitive, and Inogen has struggled over the past year, with its price dropping from a $283 a year ago to about $46. The portable oxygen concentrator market will grow for years to come as the population ages. In a competitive market with a lot of players that relies on Medicare payments, Inogen has challenges. But over the long term the market should reward solid growth. The company expects the number of Americans aged 65 and above to grow 3% annually through 2025. This group is more susceptible to COPD diagnoses because its smoking rate is higher. Inogen launched the Inogen One G5 in April, sold directly to consumers. Management described the G5 as the smallest, lightest, quietest portable oxygen concentrator on the market. The company also acquired New Aera, which has the SideKick Tidal Assist Ventilator. TAV is a noninvasive product weighing four ounces that some patients with chronic lung diseases can employ. Management expects revenues associated from New Aera to begin in 2020. With EPS growth of 11% resulting in earnings of $3.13 in five years, the stock's high price could reach $94 in the next five years. We're assuming a low price of $37.20 over the next five years. With these assumptions, the risk-reward ratio is 5.2 to 1. The expected compound annual return is 15.2%, above our goal of 15%. Mark Skousen and Jim Woods, Fast Money Alert Israel-based medical device maker InMode Ltd. has captured the fast money since its debut on the market on Aug. 7. The firm develops devices that use radio-frequency technology to, as the company writes, enable new emerging surgical procedures as well as improve existing treatments. These procedures include products and solutions primarily designed to enhance face and body contouring, medical aesthetics and women's health. The company has also developed products utilizing medically accepted radio frequency energy, or RF energy, technology, which can penetrate deep into the subdermal fat, allowing adipose tissue remodeling; in other words, non-invasive liposuction. The promise of this technology, and its high probability for widespread adoption with a population that is willing to spend millions on looking good, is one reason this company's IPO has raced so high since its debut. And though this stock can have days of big volatility, there is no denying the fact that the smart money has embraced this unique company's offerings. Chris Quigley, The Prudent Speculator Shares of Medtronic plc continued their solid rebound since late April, after the health care equipment developer and manufacturer posted solid fiscal first quarter 2020 financial results that included both a top- and bottom-line that beat consensus analyst estimates. Adjusted EPS for the quarter came in at $1.26, compared to expectations of $1.18. Medtronic had sales of $7.49 billion (vs. the $7.39 billion consensus estimate). The robust quarter was aided by tighter expense controls and solid growth in brain therapies, minimally invasive therapies, and coronary and structural heart units. The company increased its fiscal year 2020 adjusted EPS guidance from a prior range of $5.44 to $5.50 to a new range of $5.54 to $5.60, including an estimated $0.10 negative impact from foreign exchange based on current rates. Even after the recent run-up, we continue to believe that the stock offers appealing long-term upside. We remain fans of Medtronic's diverse portfolio, as when certain product lines wane, new offerings are seemingly always rolled out to help offset slowdowns and foster growth. With domestic demographic trends in its favor, we like its products and pipeline, including treatments for atrial fibrillation, aortic stenosis and various neurological disorders. The shares yield 2.0%, which relative to the yield on the U.S. 10-year Treasury actually is quite solid. Our target price has been hiked to $115. Mike Cintolo, Cabot Top Ten Trader Tandem Diabetes was a glamour leader last year, and after a five-month rest, could be ready to join the party again. The company has been posting jaw-dropping growth for a while now, thanks mainly to its slim X2 insulin pump. The pump looks like one of the best in the industry, thanks to its design (28% to 38% smaller than other pumps; larger touchscreen; lighter; automatically updated), CGM system (it uses Dexcom, so no finger sticks are necessary) and unique technology -- the X2 has a predictive low glucose system called basal-IQ, and is awaiting FDA approval for control-IQ, which would automatically adjust insulin delivery. One big study showed the time users had proper insulin levels rose 11 percentage points with control-IQ; pumps with this technology should launch in Q4. While there's competition, the entire industry is growing, with 25,000-plus people who inject themselves switching over to pumps each year. Tandem's growth has been out of this world, and it now has 96,000 users in the U.S. and, following an international launch about a year ago, shipped 12,800 pumps in second quarter alone. Management has significantly hiked guidance, even saying that its five-year guidance provided a year ago now looks outdated. Tandem is a one-product company, which has some risks, but the X2 looks like a real game-changer that should produce years of growth. Crista Huff, Cabot Undervalued Stocks Advisor DaVita Inc. is the largest provider of kidney care services and home dialysis in the U.S., treating patients with chronic kidney failure and end stage renal disease. Chronic kidney disease afflicts 37 million American adults. DaVita serves 204,900 patients at 2,723 outpatient dialysis centers, and also operates or provides administrative services to 243 outpatient dialysis centers in nine additional countries. Earnings per share are expected to rise from $3.57 in 2018 to $4.67 and $5.33 in 2019 and 2020, reflecting earnings growth of 30.8% and 14.1%, respectively. The 2019 P/E ratio is 12.1. Overall, DaVita, Inc. is an undervalued, mid-cap growth stock. One famed shareholder is Berkshire Hathaway , which increased its stake in the stock from 23.2% to 27.8% between November 2018 and August 2019. DaVita has traded largely between $50-$60 all year, other than the exaggerated drop during the market correction in May from which it rapidly recovered. The stock spent much of the prior five years trading between $62-$80, and I expect it to resume trading there in the near future. A breakout above $60 would be bullish. I rate the stock as a Strong Buy. Leo Fasciocco, Ticker Tape Digest Haemonetics provides plasma collection systems and software, which enable plasma fractionators to make pharmaceuticals. The company enables plasma collection customers to source from it a range of products necessary for plasma collection and storage. It also includes PCS brand plasma collection equipment and disposables, plasma collection containers and intravenous solutions, such as saline. The firm also has a suite of integrated software that includes solutions for blood drive planning and blood collection. Annual revenues are $968 million. Technically, the stock's recent move higher was triggered by better-than-expected earnings for the fiscal first quarter ended in June. Net for the upcoming fiscal second quarter ending in September is predicted to rise 23% to $0.69 a share from the $0.56 the year before. Analysts are forecasting a 23% increase in net for the fiscal year ending in March of 2020 to $2.93 a share from the $2.39 the year before. Looking out to fiscal 2021 ending in March analysts expect a 23% rise in net to $3.61 a share from the anticipated $2.93 the current fiscal year. The recent breakout was strong coming with a widening of the daily spread and an expansion in volume. The stock's momentum indicator is strongly bullish. We see more on the upside. We are targeting a move to $160 within the next few months. Richard Moroney, Dow Theory Forecasts Medical-equipment maker Stryker offers impressive growth, competitive technological advantages, and a reasonable valuation -- attributes that make it a healthy addition to any portfolio. Among stocks in the S&P 1500 Index, Stryker ranks No. 1 in its industry for Quadrix Overall (82) and Earnings Estimates (98) scores. All three of Stryker's business segments -- orthopedics, medical and surgical equipment, and neuro-technology & spine -- posted sales and profit growth in the first half of 2019. More than 700 orthopedic surgeons use MAKO robotic arms to assist in surgery. In the U.S., the number of robot-assisted surgical procedures rose more than 50% in the June quarter. Stryker has parlayed the MAKO competitive advantage to aggressively expand the number of locations using the robots and cross-sell other products at those sites. With MAKO robots linked to higher patient satisfaction and reduced postoperative pain, the company is on pace to boost its installed base of robots at least 25% to more than 800 by the end of the year; utilization rates for installed robots continue to rise. Stryker's sales rose 9% last year and annualized over the last five years; the consensus calls for 9% growth this year as well. The company has posted sales gains in 40 consecutive quarters, and we expect that streak to continue, contributing to solid profit growth. Indeed, analysts expect Stryker's per share profits to rise 10% in both 2020 and 2021 and estimates are on the rise.

7 Medical Products Stocks With the Right Prescription for Gains

Top picks in the fast-growing medical products market.

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