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Medtech is not recession-proof, but so what?

The medtech sector remains as compelling a safe haven as any other for investment.  Nonetheless, the depth of the recession and the reach of its negative impact (real or perceived) are enough that medtech is not immune to recessions worries.  Of course, this is obvious enough to anyne close to the subject.  But so what?

How does this fact change your perspective on the medical product industry?

What significance does this have for your investment decisions in 2009?

Is there a better place to put your money?

To put it bluntly, I believe the real impact of the recession on the medtech industry is that it simply opens opportunity for those not faint of heart, to pursue bargains.  

True, the limitation of credit, the squeeze on discretionary funds that might be spent on elective (e.g., cosmetic) procedures and the hold put on capital equipment expenditures are certainly real. But what does that leave?  Well, in fact it leaves most of the medtech industry unscathed and highly resistant if not immune to the recession.  

In my opinion, what brings economies out of recession is the dawning realization that business decisions have to be well grounded in profitability.  

So, what are savvy companies going to do?  Wait to see if in fact people really do need life-saving medical technologies?  Wait to see if the opportunities for medtech will get any better?

Call me naive, but the opportunities are about as good as they get right now.

Medtech is not recession-proof, but so what?
  • I think there's two main considerations here. The first is the fact that the healthcare sector at large is not immune to market volatility. As such, the same exposure that other sectors are experiencing is being felt in the healthcare (med-tech, biotech, devices, health IT, etc) space. Many investors think healthcare is recession-proof, but both patient demand for services fluctuates with macro and market volatility, as well as the decrease in credit market stability will have a significant impact on the ability of healthcare organizations to invest in technology. I wrote up two pieces on this very issue recently, one on why healthcare is not recession-proof (http://reiboldt.com/?p=507) and the other on how we're already seeing the impact of the credit crunch reduce hospitals' investment in new technologies (http://reiboldt.com/?p=530).

    The other side of the coin, however, says that there could be a great deal of opportunity as a "new" healthcare delivery system emerges from this crisis where technology lies at the heart of the system's efficiency. So, healthcare providers and patients, in addition to ancillary healthcare firms, will become dependent on technology (just like almost every other sector already is) in the delivery of healthcare services, which will ultimately create a lot of opportunity for med-tech firms et al. The question, though, is how do we get from where we are today (i.e., archaic, inefficient system) to that point of technological dependency and efficiency? One answer could lie in what we're seeing happen on a daily basis in Washington. Within the economic stimulus, there are provisions that will make way for more than $30 billion in additional spending on enhancing healthcare information technology, with special attention on achieving full-scale implementation of electronic health records within five years. While the issue of the stimulus can be debated, this specific provision could mean a great deal of opportunity for the healthcare sector. Again, another piece I just wrote on this issue yesterday can be found here: http://reiboldt.com/?p=548
  • All good points. You've elucidated more detail than my fundamental point, which was that, in essence, "a sinking tide lowers all boats", even medtech, but medtech is still going to be floating on top.
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