The mood of the Australian market has gone down a couple of notches, with falling oil prices playing havoc on the ASX's energy stocks. After iron ore and coal have declined so much, at least oil and gas stocks offered a little respite until recently.
What's left now? What industries can give investors some hope?
Healthcare. Apart from real estate investment trusts, it's the only sector that is making sizeable gains compared to the mediocre performance of the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO). Below is the one-year comparison chart of the healthcare sector index (ASX: XHJ) and the ASX 200 index. Just see the difference….
Source: Google Finance
This could continue well into 2015, so here are two of the top healthcare companies that could spare you from some grief and help improve your returns over the next year.
1) CSL Limited (ASX: CSL) is by far the biggest healthcare stock on the ASX and accounts for most of the healthcare sector index gains. The $40.9 billion biopharmaceutical is a global producer of blood related products and vaccine development. It will soon become the second-largest influenza vaccine producer in the world and has a number of new, innovative products in clinical testing, so the company's outlook is bright.
Consensus earnings growth forecasts are about 15% annually for the next few years. The stock is hitting new all-time highs and is trading at 27 times earnings. I would suggest waiting for a better entry price now, but don't let this one run too far ahead before acting.
2) Cochlear Limited (ASX: COH), the world leader in cochlear hearing implant products with about 60% of the US implant market, has several new products on the market after a period of manufacturing setbacks and regulatory delays. It's ready to do a lot of business and some customers and patients happily waited for the anticipated releases to get the best hearing devices available.
In the past year, the stock is up about 24% to $73 and offers a 3.1% partially franked yield. FY 2015 revenues should greatly increase and set the stage for further advances over the coming years. Analysts are looking for earnings to climb as much as 35% annually in the next two years, so Cochlear's stock could well leave the ASX 200 index in the dust. Stick with a solid grower and add this stock to your "buy" list.
