Stryker Corp Looks Good for Health Care Rebound

The medical equipment and supplies sub-sector of health care has come under significant pressure in the last 9 months or so. Big names such as Stryker Corp. (SYK), Zimmer Holdings Inc. (ZMH), and Medtronic Inc. (MDT) are trading at levels we have not seen in years. The whole aura of health care being “recession resistant” or “recession proof” is now thrown away and is an old folktale. Although these economic times are pretty much unprecedented, one thing is for certain: there has really been no safe place to hide in health care, except maybe to the likes of generic drug manufacturers such as Teva Pharmaceutical Industries (TEVA) or Mylan Inc. (MYL).

The depressed Medical Equipment and Supplies industry has faced many headwinds recently. The recession has directly caused a general slowdown in elective procedures coupled with ongoing reductions in hospital capital expenditures. The Department of Justice in the last year has brought many lawsuits to the companies mentioned above and the FDA has increased inspections of manufacturing facilities because of safety concerns. Similarly, another headwind they face is the increasing value of the dollar. The bottom lines of these companies have been adversely affected since a large portion of the industry derives revenues outside of the United States.