JPMorgan analysts reflected on the MedTech sector as the investor sentiment looks pretty poor.
“How bad is it, bad, really bad. It’s at the lowest level we’ve seen since the 2008/2009 crisis, and at a -2.5 standard deviation, or said another way, in the worst 2-3% of measurements,” the analysts said in a client note.
Drawing on historical parallels, JPMorgan analyzed how MedTech sector performance unfolds in the aftermath of such low sentiment events. Their analysis covers three timeframes: three months, six months, and one year.
They found that after MedTech sentiment improved to less than 2 standard deviations, owning MedTech stocks led to outperformance in subsequent periods.
“It shows that after a -2 standard deviation MedTech sentiment event (ie. Figure 1 below), Medtech is up 7% vs. the S&P and +3% vs. Healthcare at 3 months, +6% and -2% at 6 months, and 8% and 2% at 1 year,” they added.
“If you back out the Covid timepoint in 2021 where the Omicron wave negatively impacted procedure volumes, and MedTech, it goes to +9% and +6% at 3 months, +9% and +1% at +6 months, and +11% and +9% at 1 year. In our opinion, that’s meaningful.”
Hence, according to JPMorgan’s analysis, the right time to buy MedTech stocks is now.