Op-ed: Keep an eye on medical technology and alternative energy sectors

Dexcom’s latest continuous glucose monitoring (CGM) system, to launch in February, will be 60% smaller and warm up 75% faster than previous versions such as this one, pictured on April 8, 2019. Ben Birchall – Pa Images | Pa Images | Getty Images

Pent-up demand for medical technology

During the pandemic, large swaths of technology took off. Medical technology was not one of them, with hospitals putting many elective procedures and surgeries related to non-life-threatening conditions on hold. That has created a lot of pent-up demand today. Additionally, many firms in this space could soon benefit from new products that help treat ailments, including diabetes, sleep apnea and arrhythmia, that plague millions of people. It’s also worth noting that higher interest rates are less impactful for medical technology. Unlike other industries that borrow large sums to chase growth, medical technology generally isn’t heavily leveraged.

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Names worth considering include Insulet (PODD ), whose primary offering is a wearable pod that allows diabetes patients to forgo daily insulin injections. It recently cited strong demand for its newest version of that product. Dexcom (DXCM ) is another company addressing the needs of diabetes patients through a glucose-monitoring device. Its latest model, which is set to launch in February, is 60% smaller and warms up 75% faster than previous versions. In the meantime, a subsidiary of Inspire Medical Systems (INSP ), Inspire Sleep, has what could be a game-changing sleep apnea treatment. It’s a small device that doctors place within the patient, a contrast to how medical professionals dealt with the issue until very recently: with a clunky, awkward and obtrusive CPAP apparatus.

Government support for alternative energy grows

Whether the Inflation Reduction Act will do anything to bring down costs is a matter worth debating. But less arguable is that it is the latest example of the massive amount of policy support that exists from governments around the world for green tech firms focused on producing alternative energy sources. The U.S. Department of the Treasury is still hammering out the details about who gets what. We’ll likely learn more sometime during the first quarter. But make no mistake, several companies that have been surprisingly resilient during the most recent downturn will have an influx of new capital at their disposal to improve their fortunes even more. Among those that could do well are Array (ARRY ), a utility-scale solar panel producer. Also worth keeping an eye on is SolarEdge (SEDG ), which is focused more on the residential market in Europe.

Consumer staples not a best bet anymore

Stocks of Johnson & Johnson, Kimberly-Clarke and Procter & Gamble( — which makes many consumer staple products such as Dawn dish soap — may have hit a valuation ceiling. Joe Raedle | Getty Images News | Getty Images

Last year, many investors flocked to defensive, income-paying consumer staples. And for the most part, that strategy paid off, with the Vanguard Consumer Staples ETF easily outpacing broad market indexes over the last 12 months, all while providing a dividend of about 2.4%. However, in recent months, valuations for many of these stocks have become far too rich. In fact, consumer staples are as expensive as they have ever been relative to the S&P 500 Index . Therefore, anyone investing for growth (versus dividends) should reconsider their defensive holdings. Indeed, the likes of Johnson & Johnson (JNJ ) — which makes many consumer staple products despite technically being a health-care stock — Proctor & Gamble (PG ) and Kimberly-Clarke (KMB ) have likely hit a valuation ceiling.

A Warren Buffett moment?