Investors seeking additional growth in their portfolio should look no further than the booming healthcare industry. As providers of essential services, many companies operating in this sector are defensive in nature and will perform well regardless of external economic conditions.
Over the coming month, companies will report interim results and earnings falling below the consensus "analyst earnings target" often result in plummeting share prices. Savvy investors may use this opportunity for a cheaper entry point into these companies (provided the lower earnings are not due to wider structural issues within the company).
The recent Australian Institute of Health and Welfare report, Health Expenditure in Australia 2012-13, highlighted that total Australian healthcare costs during 2012-13 were estimated at $147 billion and grew at 5.1% per year over the past decade, far exceeding inflation and GDP growth.
"Increases in health expenditures are mainly driven by people of all ages seeing doctors more often, having more tests, treatments and operations, and taking more prescription drugs", The Grattan Institute stated in Budget pressures on Australian governments: 2014 edition. Combined with an aging Australian population, the healthcare industry will continue its rapid growth providing great opportunities for companies and investors alike.
Ensure you watch these five health care companies as they report interim results this month:
Cochlear Limited (ASX: COH) – reporting interim results 10 February
Investors are expecting big things from the world leader in cochlear hearing implants with the stock up almost 40% over the past 12 months and trading on a price-to-earnings (P/E) ratio of 38. New products are driving sales growth and the large international revenue base will amplify earnings when foreign cash is converted back to Australian dollars.
CSL Limited (ASX: CSL) – reporting interim results 11 February
CSL Limited is a global market leader in the provision of life-saving plasma medicines and vaccinations. The stock soared around 25% in 2014 and is currently selling for $88.10 on a P/E ratio of 27.
Primary Health Care Limited (ASX: PRY) – reporting interim results 18 February
Primary Health operates in the defensive health care areas of general practice and pathology. The share price lost almost 10% during 2014 and is currently trading at $4.65 on an undemanding P/E ratio of just 14.
Sirtex Medical Limited (ASX: SRX) – reporting interim results 18 February
Sirtex recently achieved 40 consecutive quarters of sales growth for its main product, the cancer-treating SIR-Spheres. Initial results from the SIRFLOX study, expected March 2015, could open a huge additional market for the company by changing the accepted use of SIR-Spheres from "salvage therapy" to frontline therapy. Trading on a sky-high P/E ratio of 50, positive news from the SIRFLOX study is already factored into the share price and it may pay to wait for a better entry point.
Virtus Health Ltd (ASX: VRT) – interim results reporting date to be announced
Virtus leads the Australian IVF market with a claimed market share of 45%. Virtus Health will benefit from the increasing demand for IVF services and the long-term trend of couples trying to have children later in life. The stock is currently trading on a P/E ratio of 19.
