Healthcare may not have been in the emergency room, or even the ICU, during 2011, but this sector was sick from beginning to end. Unfortunately, the story that was true in 2010 is still true today - higher unemployment means fewer people with health insurance, and even those with coverage are more nervous about taking time off or meeting their copays. At the same time, hospitals and the federal government continue to draw hard lines on pricing, and there have been few innovative product launches to stimulate new markets.

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Just to frame the discussion, the Dow Jones U.S. Medical Devices Index Fund (NYSE:IHI) has fallen more than 5% year-to-date as of this writing.

A Very Familiar Name on Top
Yet again, one name dominated the list of top-performing med-techs. Intuitive Surgical (Nasdaq:ISRG) is still really the only game in town when it comes to surgical robots, and demand for these devices has remained high despite a fairly conservative environment for hospital equipment. Intuitive has seen revenue rise nearly 30% over the trailing twelve months, while the stock has jumped nearly 70%. Trading at over 23 times EBITDA and nearly 10 times revenue, this is hardly an undiscovered bargain in the space, but it does offer the growth that institutional investors are so desperate to find. (For related reading, see A Primer On The Biotech Sector.)

Interestingly enough, the next two best performers are two of the largest companies in the sector and are often derided and lamented for their unimpressive growth potential. Abbott Labs (NYSE:ABT) has risen more than 17% this year, helped by good stent, diagnostics and drug sales, as well as investor approbation for its plans to split the business. Giant Johnson & Johnson (NYSE:JNJ) is also a market-beater this year (up about 7%) as a renaissance in the prescription drug business offsets poor performance in devices, diagnostics and consumer health.

To find more examples of large med-tech names that are likely to end the year in the green requires a bit of stretching the meaning of both "large" and "med-tech". Vision care specialist Cooper (NYSE:COO) has delivered almost 20% gains this year, while veterinary lab company IDEXX (Nasdaq:IDXX) and dental products company Dentsply (Nasdaq:XRAY) have delivered single-digit gains.

And that's pretty much it when it comes to the success stories.

Plenty of Names in the Red
By comparison, it takes scarcely no work at all to find familiar med-tech names that have lost money for shareholders in 2011. Virtually the entire categories of cardiac rhythm management and orthopedics are in the red this year, as government investigations over reimbursement and concerns about proper patient identification weigh on the sector. Medtronic (NYSE:MDT) is the least-bad with a 4% retracement, while St. Jude (NYSE:STJ) has fallen 20% and Boston Scientific (NYSE:BSX) has dropped 30%. Likewise, Stryker (NYSE:SYK), Zimmer (NYSE:ZMH) and Smith & Nephew (NYSE:SNN) all dropped by mid-teen percentages.

Along the way, a host of other names have delivered modestly disappointing performance this year. Baxter (NYSE:BAX), Bard (NYSE:BCR) and Covidien (NYSE:COV) are all modestly in the red for 2011, even though the performance at Baxter and Covidien hasn't been all that bad.

The Bottom Line
Will 2012 be a year of recovery in this sector? On the plus side, this year's poor performance has left many names like Stryker, St. Jude, Medtronic and Covidien attractively priced for patient long-term investors. That said, there is no reason to expect a great rebound in sales or profits until employment picks up and government pressures on reimbursement and regulatory approval ease up. (For related reading, see Investing In The Healthcare Sector.)

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At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.

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