Globe Investor
 
 
 

April 20, 2021

 
Sixteen ways to invest in the high-potential medical tech sector. Plus, why the TSX is set for an earnings bonanza
 

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Sixteen ways to invest in the high-potential medical tech sector. Plus, why the TSX is set for an earnings bonanza - A roundup of investment ideas for active investors
Morgan Stanley analyst Cecilia Furlong’s earnings preview for the medical technology sector came in at an inbox-clogging 108 pages. I am already a convert to this sector having purchased a position in Stryker Corp. in November 2019.
 
If anything, the medical technology sector is even more attractive than in late 2019. Ms. Furlong notes that the sector is trading at less than a five per cent premium to the S&P 500 when a 30 per cent premium is the historical average, thanks to stable and high profit growth prospects.
 
It’s also the case that COVID-19 has stretched health-care capacity across the world, motivating national agencies to invest in new technologies to provide better, more efficient treatment. The pandemic has also created a large backlog of elective surgeries that point to strong profit growth in areas like orthopedics ahead.
 
 
 
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The long term secular growth drivers for medical technology companies – notably an aging developed world (and Chinese) population that will require incrementally more health care with each passing year – remain in place. Innovation also continues – robotic surgery designer Intuitive Surgical Inc. is an excellent example.
 
Ms. Furlong believes SI-Bone Inc., the developer of a new surgical technique for spinal injuries, and Inari Medical Inc., with a new procedure to clear clogged arteries, are next stage disruptors in the sector. Haemonetics Corp., inventor of an automated blood processing system, is also listed as a future winner. Investors should, however view these stocks as speculative.
 
Morgan Stanley is extremely confident about the 2021 profit outlook for medical technology, as Ms. Furlong writes: “We simply do not see risk into [first quarter] results.”
 
The research team have overweight ratings on 16 medical technology companies. In addition to SI-Bone, Haemonetics and Inari, these are Edwards Lifesciences Corp., Medtronic PLC, Nevro Corp., Abbott Laboratories, Alcon Inc., Boston Scientific Corp., Teleflex Inc., Axonics Inc., Bioventus Inc., Becton Dickinson and Co., Hill-Rom Holdings Inc., Zimmer Biomet Holdings Inc. and (happily for me) Stryker Corp.
 
-- Scott Barlow, Globe and Mail market strategist
 
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The Rundown
 
Expected earnings bonanza sets bullish tone for Canadian stocks
 
Throughout the pandemic, analysts and forecasters have struggled to keep pace with the explosive rebound in economic activity and corporate profits in both Canada and the United States. As a result, the corporate sector has consistently posted results well ahead of expectations, providing markets with a steady drumbeat of positive news, thereby reinforcing investors’ upbeat sentiment. Investors have reason to believe this pattern will continue as first-quarter results start to flow. The set-up is especially bullish for cyclical sectors, such as resources and financials, which make up the bulk of the Canadian stock market. Tim Shufelt reports.
 
Three low-risk ways to take advantage of the steady growth in water management industry
 
A few investors have discovered that water-based investing can offer slow but steady growth potential and respectable cash flow. But most ignore the sector or only have exposure to it through an infrastructure fund. And that could be a missed opportunity, because it’s a huge business that’s growing at a steady rate of 6.5 per cent annually. Gordon Pape has three recommendations on ways you can invest in the water management industry.
 
The critics weigh in on the model dividend portfolio
 
John Heinzl has a lot of appreciative followers of his dividend growth portfolio. But some readers are doubtful that it’s really the best investing strategy. “To me the praise for the strategy is skewed and disingenuous,” read one recent email. John provides his response.
 
Tech retakes market lead as investors eye yields, earnings
 
U.S. technology and growth stocks have taken the market’s reins in recent weeks, pausing a rotation into value shares as investors assess the trajectory of bond yields and coming earnings reports. The gains have followed a months-long rotation in which tech stocks were outpaced by shares of banks, energy companies and other economically sensitive names that have surged since breakthroughs in COVID-19 vaccines late last year. The increases in many of these so-called value stocks have slowed lately, while U.S. Treasury prices have come galloping back in April after a sharp first-quarter sell-off. This suggests that some investors may have already priced in a rapid growth spurt that is showing up in economic data. Lewis Krauskopf of Reuters reports.
 
Canada approves world’s first Ether ETFs for retail investors
 
Canadian asset managers are racing to launch the world’s first cryptocurrency exchange-traded fund to track the price performance of Ether now that regulators have given several investment funds the green light. On Friday, Purpose Investments Inc., Evolve Funds and CI Global Asset Management were all cleared by the Ontario Securities Commission to launch the first set of ETFs to invest directly in the digital asset, currently the world’s second-largest cryptocurrency by market capitalization, behind bitcoin. Clare O’Hara tells us more about them.
 
Others
 
The most oversold and overbought stocks on the TSX
 
Monday’s analyst upgrades and downgrades
 
Monday’s Insider Report: Major shareholder tops up his position in this housing play yielding 8%
 
Canadian ETFs: The latest launches, terminations and fee reductions
 
Globe Advisor
 
The Financial Times: The bright spot in strained bond markets
 
Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’ portfolios.
 
Ask Globe Investor
 
Question: On the T5013 tax slip for my Brookfield Infrastructure Partners LP (BIP.UN) units, there are two box 135s (foreign dividend and interest income) labelled as BMU (Bermuda) and USA (United States), respectively. Am I to assume that the funds in boxes are in Bermuda and U.S. dollars, in which case I would need to convert to Canadian currency for my tax return? My broker has not given me a definitive answer.
 
Answer: Your broker – not Brookfield Infrastructure – issued the T5013 and should be able to answer your question. But since your broker seems to be confused, I checked with Dorothy Kelt at TaxTips.ca.
 
The country codes BMU and USA refer to the origin of the foreign dividend and interest income, not to the currency. The amounts in box 135 are typically reported in Canadian dollars, unless a different “functional currency” is specified in box 205 of the T5013, Ms. Kelt said. “If there is no code in box 205, then everything is in Canadian dollars,” she said.
 
--John Heinzl
 
What’s up in the days ahead
 
Auto-parts stocks, such as Magna International, are surging even as the industry struggles to keep up with demand. What’s the outlook from here? Tim Shufelt will delve into the topic.
 
Click here to see the Globe Investor earnings and economic news calendar.
 
More Globe Investor coverage
 
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You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.
 
Compiled by Globe Investor Staff
 
 
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