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5 healthy stocks for your portfolio

Investing in the healthcare sector certainly holds its risks. The success of companies relies heavily upon the quality of the products they offer to the market, their ability to expand into new markets and government regulations, to name just a few.

However, some of the companies on the market also hold enormous potential to drive earnings and profit well into the future, based on new research or developed products. The Australian Financial Review has highlighted a number of health stocks that are worth your attention.

Sirtex Medical (ASX: SRX) is a biotechnology company focused on manufacturing and distributing liver cancer treatments. Whilst it has delivered outstanding growth over the last few years, the market battered down its price after the company realised only 6.1% growth in sales of its liver cancer treatment drug for the third quarter, compared to 34% growth in the previous corresponding period. Having more than doubled in price over the last year and sitting at $12.20 with a P/E ratio of 29, it is quite expensive at today’s price, however, it is definitely worth your consideration should the share price fall anytime soon.

Acrux (ASX: ACR) has a primary focus on treating men with low levels of testosterone with its spray-on medicine called Axiron. Offering a 2.2% dividend yield, Acrux has given its licensing partner, Eli Lilly, outstanding returns in recent times. Trading on a P/E of 41, the market is anticipating strong earnings to continue well into the future, however, Macquarie Private Wealth is a little more reserved on its potential. Whilst they are concerned that market growth could begin to slow down, a reduction in rebate in the US could also take away from Acrux’s competitive advantage in the industry.

The prospects of infection control developer Nanosonics (ASX: NAN) were also highlighted. With its Trophon product (an ultrasound probe disinfection system) gaining in popularity, the company’s share price has gained 50% since the beginning of May. Whilst its sales declined by 13% for 1H 2013, it is expected that it will benefit significantly from further global expansion – particularly the US and Europe.

Whilst Alchemia’s (ASX: ACL) and Virtus Health’s (ASX: VRT) prospects were also highlighted, other quality companies failed to receive a mention. Resmed (ASX: RMD), a manufacturer of respiratory disorder treatments, as well as Cochlear (ASX: COH), a manufacturer of cochlear implantable devices for the hearing impaired, have both proven themselves to be global leaders in their respective fields. Each of these corporations have enormous growth potential and are currently trading at very attractive prices.

Foolish takeaway

Just like with any other industry, there are risks involved in the healthcare sector. Although enormous gains can be made from companies that could potentially produce breakthrough technologies, a safer option may be to put your money with those that have already established themselves.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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