Goldman Says MedTech Tools Draw Investors Away From Industrials

(Bloomberg) -- Life science tool companies are gaining traction among investors as their industrial brethren struggle to deliver, according to a Goldman Sachs analyst.

Portfolio managers have loaded up on tool companies like Thermo Fisher Scientific Inc. and Agilent Technologies Inc., while rotating away from out-of-favor industrial heavyweights, analyst Asad Haider highlighted in a note to clients dated June 4.

Thermo Fisher -- which has advanced more than 20% this year through Wednesday -- and beaten-down industrial bellwether 3M Co. make excellent proxies for the trade, Haider said. Thermo Fisher’s outperformance over the better half of a decade has come on the back of booming sales and added service offerings. 3M’s stock, meanwhile, has been one of the Dow Jones Industrial Average’s worst in 2019, falling 14% this year as demand for its products and industrial activity slowed.

That gap will keep widening with earnings for the tools sector expected to continue to boom as the group maintains pricing power and better operating margins “even amidst a broader macro deceleration,” Haider wrote.

For life science tool companies “the premium is warranted,” Haider said, as the sector's outperformance against the S&P 500 Index “is reflective of an ongoing realization of a significantly better current operating environment vs the broader industrials complex.”

To contact the reporter on this story: Cristin Flanagan in New York at cflanagan1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Courtney Dentch

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