Everyone knows that older populations and growing public demand are likely to see incrementally increasing healthcare spends over time. The best healthcare businesses are likely to be prime beneficiaries of this long-term trend and the ASX offers four attractive candidates for buy-to-hold investors.
They're popular because the products they offer let them maintain profit margins while enjoying long growth runways. This is a potent growth combination which means they trade at premium prices, but given time should reward patient investors.
CSL Limited (ASX: CSL) was able to generate a profit before tax of $1.6 billion on just $5.33 billion of sales revenue in FY14. The market and clients just love its high margin human health medicines which have delivered shareholder returns of 128% over the past five years.
CSL's dominance of the specialist areas in which it operates means competitors find it hard to get a foothold. This company remains one of the best options going for conservatively-minded growth investors. Shares are up 128% over the last five years.
ResMed Inc. (CHESS) (ASX: RMD) is another business with a large global market and best-in-class competitive advantage. Air flow generators account for more than half of net revenues and the commitment to bringing new products to the market ensures sales keep ticking over.
The company markets its products in over 100 countries to a network of distributors and also employs its own direct sales force. North and Latin America accounted for 54% of sales in FY14, but the rest of the world is showing strong growth. Shares have more than doubled in value since 2012.
Ramsay Health Care Limited (ASX: RHC) is among the top five private hospital operators in the world with 212 hospitals across five countries including the UK, France and Australia.
The company can grow by further selective acquisitions and brownfield developments. Moreover, as demand for private hospital care increases so does Ramsay's ability to lift profits via higher margins as expenses remain relatively fixed. The most recent full-year net profit was up 19% on a 17.5% increase in revenue. The Ramsay Way has delivered shareholder returns in excess of 400% over the past five years
Cochlear Limited (ASX: COH) delighted the market recently with a strong second half of the financial year which saw revenue up 28% on an FX-adjusted basis over the prior corresponding period. This was mainly attributed to strong new product sales and improved operating margins.
Cochlear's addressable market remains enormous and as long as it retains the best-in-class reputation as a competitive advantage it remains a solid bet. Shares are up around 56% since the company was forced to recall a faulty product in 2011.
