Here's why I can't wait to buy Chemist Warehouse shares

Chemist Warehouse would tick all my boxes for a great investment.

| More on:
Three scientists wearing white coats and blue gloves dance together in a lab.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the biggest pieces of ASX news this week was the revelation that Chemist Warehouse shares might, at long last, be coming to the Australian stock market.

As we covered earlier this week, rumours are abounding that Chemist Warehouse might make its long-awaited ASX debut through some kind of 'reverse-merger' with ASX 300 healthcare stock Sigma Healthcare Ltd (ASX: SIG).

Sigma shares were quickly halted from trading amid these rumours, with the company confirming that "an announcement relating to a potential material transaction" is on the way. The shares have reportedly been halted until at least next week to "ensure the market is not trading on an uninformed basis while those discussions are ongoing".

So we don't yet know if Chemist Warehouse is indeed coming to the public markets. But I'm excited anyway. That's because Chemist Warehouse — if it does eventually list on the ASX — is a company that ticks almost all of my boxes as a potential investment.

Why am I keen to buy Chemist Warehouse shares?

Chances are most of us have visited a Chemist Warehouse somewhat recently. After all, this is a pharmacy chain that, according to a recent analysis from EY, "now commands over 50% market share in Australia".

Chemist Warehouse (at least in its current form) was founded back in 1993. So this is quite an accomplishment. Its controversial (yet evidently lucrative) business strategy of sidestepping Australia's strict pharmaceutical regulations that limit pharmacy proliferation has proved to be a winner.

My favourite investments usually have at least some of the following characteristics

  • a market leader in its industry
  • indication of the presence of a strong economic moat
  • operating in a defensive sector that is resistant to recessions and inflation

Chemist Warehouse seems to tick all three boxes.

It's clear that the company commands a leading position in the pharmaceutical industry if EY's analysis is to be believed.

Chemist Warehouse has strong brand power, as well as an obvious pricing advantage. Both of these moats have arguably allowed the company to expand at the expense of competitors.

And pharmaceuticals and medicines are highly defensive markets. When most of us are sick, we buy the medicines and pharmaceuticals that help us ride it out, regardless of economic conditions.

Private companies and public knowledge

Of course, I'll be doing some due diligence before I actually pick up the shares. Even now, Chemist Warehouse remains a private company. This means that details such as internal operations, financials and other information that public companies have to disclose remain unavailable to the public.

I'll want to get a good look at this information before buying up shares. I'll also want to buy the company at a price that makes sense. Not on whatever it trades at when it first lists.

But even so, I'll be excited to pick up some shares if and when the company eventually joins the ASX. Provided there are no red flags, of course.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Healthcare Shares

a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.
Healthcare Shares

Broker says this ASX 200 biotech stock is a top buy

Let's see what Bell Potter is saying about this biotech.

Read more »

Cropped shot of an attractive young female scientist working on her computer in the laboratory.
Healthcare Shares

Why CSL shares are a buy today despite the looming Trump tariffs

A leading expert believes CSL shares are still trading for a bargain today. Here's why.

Read more »

A businesswoman pulls her glasses down in shock to look at the bad news on her computer.
Healthcare Shares

Why did the Telix share price just crash 16%?

Investors are sending the Telix share price plunging today. But why?

Read more »

Broker analysing the share price.
Healthcare Shares

Expert: 2 ASX healthcare stocks to avoid before reporting season

Not all healthcare stocks are created equal.

Read more »

A group of people in a corporate setting do a collective high five.
Healthcare Shares

Should I buy Pro Medicus or CSL shares ahead of earnings season?

The ASX healthcare sector may be currently undervalued.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Healthcare Shares

Why Mesoblast shares can keep storming higher

More big returns could be on the way for buyers of this high risk stock according to Bell Potter.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

couple having a happy discussion with a banker
Healthcare Shares

Expert: 4 ASX healthcare stocks to buy ahead of reporting season

Could these ASX healthcare stocks be good additions to your portfolio?

Read more »