Zimmer Biomet Holdings is a leader in orthopedic reconstructive implants. It earns more than half its revenue from the sale of large joints. The company has a dominant position in markets like the US, Europe, and Japan.
Competitive Advantage Enjoyed By Zimmer Biomet
Zimmer operates in an industry environment where its customer (the surgeon) faces high switching costs. It takes some learning to master implant procedures and instrumentation of specific companies. Additionally, there isn’t enough volume of implant surgeries to justify maintaining the know-how of multiple brands of implants.
Zimmer hasn’t been immune to the effects of the pandemic. As COVID patients overwhelm hospitals, elective procedures such as knee and hip replacements have taken a back seat. Certain elderly patients, who have postponed their treatments, end up passing away due to non-COVID reasons which also ends up lowering the number of procedures that are ultimately performed. Zimmer also has to compete with robots from competitors like Stryker’s Mako robot. Competitors are creating an installed base that Zimmer has to counter with its own robot.
The biggest potential headwind could be the transformation of healthcare. If surgeons join hospitals as employees, then they may not have much of a say in selecting implants of specific companies. Changes in pricing and bundled payments are key trends to watch out for.
Price Action Of The Best Medical Stocks To Invest In
Zimmer Biomet’s stock closed at $142.59 on 14th December 2020. It is down 5% over the past month and down 4.43% for the year 2020. The stock has gained 76% since hitting a low in March 2020. On a longer horizon of 5 years, the stock has gained 44%. Zimmer Biomet Holdings currently trades at a 0.67% dividend yield.
Stryker Corporation closed at $230.95 on 14th December 2020. It is down 2% over the past month and up 9.7% for the year 2020. The stock has gained 82% since the March market crash in 2020. On a 5-year basis, the stock has risen by 150%. Stryker currently trades at a 1.09% dividend yield.
The best performing healthcare stock in 2020 has been Moderna Inc. It has gained a stunning 700% this year and has been in the news for its Coronavirus vaccine.