While excellent medical care is always in high demand, the healthcare industry is constantly evolving. Companies are not automatically worth investing in just because they provide essential medical services. Only those who can keep pace with the changing nature of the industry can achieve excellent returns in the long term.
There are many such stocks in the market. Let’s take a look at two that specialize in developing medical devices: DexCom (NASDAQ: DXCM) And Intuitive surgery (NASDAQ: ISRG). These healthcare leaders are both well positioned to deliver outsized returns over the next decade. Let’s see why.
Do you miss the morning spoon? Wake up with Breakfast news in your inbox every market day. Register for free »
DexCom has been experiencing some issues lately. The company’s results in the second and third quarters were not strong. Unimpressive sales growth, partly due to more consumers taking advantage of discounts than expected, hurt performance.
However, DexCom still has attractive prospects. The continuous glucose monitoring (CGM) systems are much more convenient for diabetes patients than manual blood glucose meters. Yet CGM’s global penetration was just 1% at the start of this year.
With DexCom actively seeking new areas to expand its addressable market, the company has a huge runway for growth. It also recently expanded its U.S. market with an over-the-counter CGM option, Stelo, for people who don’t use insulin. Patients with prediabetes or type 2 diabetes are eligible for Stelo.
Additionally, thanks to DexCom’s leadership in the CGM market and diabetes ecosystem, other companies have developed devices and apps compatible with DexCom’s, such as insulin pumps and diabetes pens. The more people in DexCom’s ecosystem, the more attractive it becomes to third-party device and app developers, which will attract even more patients. In other words, it builds one network effecta powerful competitive advantage.
The company’s financial results and stock performance have been negatively impacted over the past decade, thanks to increased adoption of CGM technology:
There’s a lot more room to operate over the next decade, so DexCom can still deliver market-beating returns. It is not too late to invest in the stocks.
Intuitive Surgical is the market leader in robot-assisted surgery (RAS). The leader in healthcare is best known for its da Vinci system, a device that helps doctors perform minimally invasive surgeries thanks to small, highly maneuverable instruments. In March, the U.S. Food and Drug Administration approved the fifth generation of Intuitive’s crown jewel, a testament to the company’s continued emphasis on innovation.