As the coronavirus epidemic curve moves toward its peak throughout the world, the need for ventilators – machines that provide oxygen to those who cannot breathe on their own – is only going to increase as stretched health care systems scramble to keep alive critically ill patients who have the disease.
At present, U.S. hospitals have access to roughly 200,000 ventilators; however, the American Hospital Association estimates more than 900,000 people could need the devices in a worst-case scenario, per abcnews.go.com. Furthermore, projections from the Centers for Disease Control and Prevention (CDC) indicate that millions of Americans infected with COVID-19 may require intensive care.
On Monday, President Donald Trump said that the existing stockpile of ventilators might not be enough to meet demand but that the government was already placing orders to increase its inventory. Moreover, the White House continues to look at removing some of the red tape in the manufacturing process to expedite the supply chain.
Traders should add these three ventilator manufacturer stocks to their watchlist as the illness spreads and the demand for respiratory products grows. Below, we'll examine each company in further detail and turn to the charts to identify key trading levels.
Medtronic plc (MDT)
Headquartered in Dublin, Ireland, Medtronic plc (MDT) manufacturers and sells ventilators, along with other respiratory care products, through its subsidiary company Puritan Bennett. The medical devices maker recently told The Irish Times that it sees no disruption to its production of ventilators amid COVID-19 and is meeting all current customer demand globally. Medtronic stock has a market capitalization of $107.50 billion, offers a 2.79% dividend yield, and is trading down almost 30% on the year as of March 18, 2020.
Despite the growing demand for ventilators, Medtronic shares have sold off sharply this month in sympathy with the broader market. Those looking to buy should watch how the stock responds at the $73.50 level – an area that should find major support from the October 2017 low. Before committing capital, traders should wait for an indication of a price reversal such as a hammer or bullish engulfing pattern. Look to book profits at significant resistance areas, such as $84.50 and $97.50.
ResMed Inc. (RMD)
ResMed Inc. (RMD) has positioned itself as a global leader in respiratory medical devices for the treatment of sleep apnea. The company manufactures and markets home and hospital ventilator products through its Sleep and Respiratory Care business segment. The $23.35 billion San Diego-based company said that it's experiencing increased orders from China and South Korea, adding that it remains confident of meeting current global demands. As of March 18, 2020, ResMed stock yields 1.13% and has added 4.42% year to date, outperforming the medical instruments and supplies industry average and S&P 500 by 21.19% and 26.14%, respectively.
ResMed shares have remained in a steady uptrend over the past three years, apart from a 23% correction in January 2019. Recent selling in the stock stabilized at $140, where the price finds a confluence of support from the September swing high and rising 200-day simple moving average (SMA). Yesterday's 17% rally occurred on above-average volume, indicating buyer conviction. Momentum traders should think about setting a stop at either the midpoint or low of Tuesday's wide-ranging day and use a trailing stop to bank profits.
Allied Healthcare Products, Inc. (AHPI)
With a market value of $55.99 million, Allied Healthcare Products, Inc. (AHPI) manufactures a variety of respiratory care devices, medical gas construction equipment, and emergency medical products for use in hospitals and home health care. The St. Louis, Missouri-based firm says that it has designed its products to meet the unique ventilation demands that can occur during a mass casualty event or pandemic, making it a key stock to follow as the COVID-19 epidemic curve develops. Allied Healthcare stock's year-to-date return of over 1,000% as of March 18, 2020, indicates that investors have baked in much of the upside.
A price range this month of between $10 and $25 shows the extreme volatility in the stock and highlights the importance of strict risk management. Active traders could buy the stock on a bullish breakout above the pennant pattern and target a move to last month’s high at $45 while managing downside with a stop placed below the pennant's top trendline. Those who take a trade may not want to hold positions overnight to avoid gap risk.