Health care as a sector has been underperforming the broader market since 2023. That may be changing for three distinct reasons I’ll cover below. We just added a new position in Telemedics (TMDX) in our growth portfolio that is breaking out on both the monthly and weekly charts. But first, we must examine why the health care sector is breaking out and playing catch up to the broader market. It’s optimal to have the broader sector powering your chosen stock ahead. Looking at the weekly chart of health care sector , we see that the XLV price chart (middle pane) is threatening a close above the 2024 high of $158. A close above $158 would confirm a weekly and monthly breakout. The top pane of the pane of the chart is the relative strength ratio of XLV/ S & P 500 ETF (SPY) . This has been declining since 2023 but in the last month we’re seeing a turn higher — the third attempt — since 2023. Is the third time the charm? Health care is playing catch up for three reasons: Classic rotation into defensive and value oriented sectors: November has produced exceptional volatility in the growth trade for various reasons that we’ve discussed in this Tuesday column. Improving fundamentals and growth visibility: GLP-1 and obesity drugs are increasing the total addressable market beyond just diabetes. Lower US interest rates are driving “future cash flow” business that will borrow, invest, and reap the rewards later such a biotech. Rising AI adoption is driving drug discovery, faster clinical-trial design and precision diagnostics & imaging. TransMedix (TMDX) built the organ care system. This is a portable warm-blood perfusion technology that keeps donor hearts, lungs and livers functioning during transport, which drastically increases the availability of transport-ready organs. The company runs a national organ procurement network with FDA-approved tech that competition hasn’t matched that creates a recurring, services-based revenue model. While the company hasn’t officially positioned itself as an AI company, it is building one of the largest database of organ donors — which could in the future support machine-learning models for the logistics of organ donation and allocation. TMDX monthly chart shows a long rally continued within a parallel channel. The stock has been consolidating since August 2024. But with the three reasons for XLV outperformance along with the company-specific fundamentals, a monthly close above $135 would confirm a monthly breakout. Looking at the bottom panel you see yearly revenue and EPS percentage growth that is just off the charts, most notably a swing from negative to positive EPS in 2024 with a 231% growth rate. Revenue since 2022 has also exploded higher: 2022: +208% 2023: +158% 2024: +82% 2025 (projected): +36% The weekly chart is basing around $145 set to break higher. In the most recent portfolio adjustment / update at Inside Edge Capital we added a 2% position. If we can achieve a breakout above $145 I plan to increase the position by 50% to achieve a 3% allocation. -Todd Gordon, Founder of Inside Edge Capital, LLC We offer active stock alerts, portfolio management, as well as regular market updates like the idea presented above at www.InsideEdgeCapital.com/CNBC . DISCLOSURES: Gordon owns TMDX personally and in his wealth management company Inside Edge Capital. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
