If you're looking to invest for the long-term and want to outperform the ALL ORDINARIES (ASX:XAO) (INDEX:^AXAO) index, there's a lot to like about the healthcare sector…
Defensive earnings, growing demand, pervasiveness across geographies and cultures, competitive advantages, good profit margins… the list goes on.
Just this year, accounting giant Deloitte identified 'Health' as a key source of economic growth for Australia over the next two decades.
Three of best healthcare stocks I've got on my watchlist in the coming year are Ansell Limited (ASX: ANN), ResMed Inc. (CHESS) (ASX: RMD) and Admedus Ltd (ASX: AHZ).
Ansell is the world leader in industrial, single use and surgical gloves. It also commands the number two position in branded condoms. Whilst the group has acknowledged the mixed economic outlook across the globe, its history of growth and innovation give me confidence in its ability to increase profitability over the ultra-long-term. In just five years, sales have jumped nearly 60% and profits are up 75%. However in 2015 the company expects to report strong EBIT and EPS growth, despite an increased number of shares on offer.
ResMed is the leading developer of devices for sufferers of sleep apnoea and other respiratory disorders. Despite a near 30% jump in share price in the past six months, the company continues to chalk up good quarterly results. In addition to growth from the Americas, Asia and Europe, the company is undertaking a share buyback program and analysts are tipping this will be reflected with further earnings and dividend per share growth in the year ahead.
Admedus is a much riskier proposition than the two aforementioned companies given its size ($173 million market cap) and lack of profitability. The ambitious small-cap is however busy selling its CardioCel tissue regenerative technology to worldwide markets and has received ethics approval for its Herpes vaccines Phase II study – which will enable it to initiate the program.
Whilst 2014 was a tough year for Admedus shareholders, compared to the standout performance in 2013, it looks as though we can expect a stronger performance in 2015. The company's recent market update showed increased use of its CardioCel product by surgeons and CEO Lee Rodne said, "We anticipate that 2015 will result in continued revenue growth for Admedus as it pushes ahead with building a truly global healthcare company."
Foolish Takeaway
Every Australian should consider having some exposure to the growing healthcare market but as always, we must be prepared to be patient and wait for a good price before hitting the buy button. At today's prices however I think the long-term outlook for each of these three companies is looking bright.
