While COVID-19 spreads globally, hospitals are preparing to handle an ever-growing influx of people infected with the novel coronavirus. Medical resources -- personnel, equipment, and hospital rooms -- have been reallocated for the outbreak. In most cases, non-essential procedures and doctor's visits are being postponed.

Medical device and equipment manufacturers will be affected by both. The U.S. stock market has been eviscerated as investors react to the pandemic and businesses struggle to adapt to a world where consumers are confined to their homes. Could medical device stocks provide a bright spot for your portfolio?

Elderly person on ventilator.

Image source: Getty Images.

Demand for ventilators

A staggering report from the Society of Critical Care Medicine estimated that as many as 960,000 COVID-19 patients would require ventilation, but the U.S. only has 200,000 ventilators. And that's if you include older units, anesthesia machines, and units in the strategic national stockpile.

In response, Medtronic (NYSE:MDT), one of the largest medical devices makers and a manufacturer of ventilators, issued a statement on March 18 that it is ramping up production of its high-performance ventilators by more than 40%. In addition to Medtronic, expect to see expanded production from other manufacturers including Philips Healthcare, a division of Dutch conglomerate Koninklijke Philips (NYSE:PHG), ResMed (NYSE:RMD), and Becton, Dickinson and Co. (NYSE:BDX). A 2016 market research report noted that the top five manufacturers held 50% of the global ventilator market share.

While those leading makers of the much-needed equipment may be stocks to keep on your radar, watch for news from automakers. Reports emerged that General Motors (NYSE:GM), Ford (NYSE:F), and Fiat Chrysler (NYSE:FCAU) are exploring retooling factories to produce ventilators in this time of crisis. Car production has been halted until March 30, freeing up personnel and equipment. In addition, the White House invoked the 1950s Defense Production Act, which allows the government to direct industrial production.

Tesla (NASDAQ:TSLA) is potentially entering the fray. In response to a call to repurpose its factory to make the machines, Elon Musk tweeted, "We will make ventilators if there is a shortage." New York City's Mayor Bill de Blasio even asked Elon Musk to begin production to help NYC.

Diagram of body with hot spots for hip, shoulder, elbow, and wrist

Image source: Getty Images.

A backlog of delayed medical procedures grows

While the stocks of ventilator manufacturers may benefit in the near term, healthcare investors with a longer time horizon may seek to capitalize on a growing, pent-up demand for medical devices. Interventions like knee replacements, eye surgeries, and procedures to alleviate pain will be rescheduled at some point in the future. That makes getting acquainted with some of the leading medical device firms now a good idea.

Many of the elective surgeries fall into the orthopedic basket. These seek to correct chronic pains or replace degenerative parts like knees and hips. Johnson & Johnson (NYSE:JNJ), Stryker (NYSE:SYK)Zimmer Biomet (NYSE:ZBH), Smith & Nephew (NYSE:SNN), and Medtronic round out the largest of the orthopedic device makers.

While J&J's stock lost 17% this year, the other four lost between 33% and 44%. At the current levels, it's worth investing some time to figure out which ones may be right for your portfolio. 

Smaller outfits NuVasive (NASDAQ:NUVA), a spine device specialist, and Wright Medical Group (NASDAQ:WMGI), focused on devices for wrists, hands, feet, and ankles, may be worth keeping on your radar screen. NuVasive's stock cratered by 50% this year. Luckily for Wright, it managed to only lose 13.6% in 2020.

What's next?

COVID-19 will likely wreak havoc on many companies' earnings for the next few quarters, including the medical device companies. However, postponed procedures will likely get rescheduled at some point in the future. Savvy healthcare investors with a time horizon of a few years should monitor the stocks of these medical device companies. These stocks have a high probability of rebounds. Buying the biggest of these companies like Medtronic or J&J provides the most conservative options.