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4 high-growth health care stocks for your portfolio

Forget blue chips like Rio Tinto (ASX: RIO), Australia’s small-cap healthcare stocks are more exciting! Shareholders in these four companies have enjoyed very healthy returns in the past 12 months as more and more money entered the local share market and trickled down in smaller growth stories.

Healthcare is a timeless commodity because it will continue to be in demand, forever, the look and deliver of services might change but companies that adapt to the environment will continue to last. Previously unheard of, these speculative micro-caps could be the next big thing in their respective fields and seek to bring disruptive change to their profession. However, because they are so small, investors should be willing to take on more risk as well.

Admedus (ASX: AHZ) — formerly Allied Healthcare – is a diversified healthcare company that is in the process of gaining worldwide acceptance for its CardioCel technology. It uses a Band-Aid like patch to repair heart defects. The company announced earlier this year that it made its first shipments of the product overseas. Year to date, the stock is up 610%.

As technology becomes more sophisticated, making a complex medical process easier will be the way of the future. AtCor Medical (ASX: ACG) has used it SphygmoCor systems to noninvasively test for cardiovascular issues such as high blood pressure, autonomic function and artery stiffness. Year to date, the stock is up 142% yet has a P/E ratio of just 9.

You don’t have to be a heart surgeon to profit from health care either, Capitol Health (ASX: CAJ) offers perhaps the safest business model of the companies on this list. Capitol Health provides medical diagnostic imaging services and since 2006 has become Victoria’s second biggest provider. Year to date, the stock is up 250%.

Getting into these types of stocks when they’re so small can be very risky. If you put $1,000 in 20 small healthcare stocks a year ago, including our next pick, and the other 19 went bust, you’d still be ahead by $19,000. Diversification is important with these stocks.

Up an incredible 3,800% from this time a year ago, Global Health (ASX: GLH) is a tiny healthcare technology company that offers e-health solutions to medical professionals. Doctors can use its services to share patient information online, write reports, referrals and much more. In FY13, the company turned a profit of $1 million (but it could grow significantly in the next year), has a market capitalisation of only $12 million and is now debt-free and looking for growth opportunities, both organically and acquisitively.

Foolish takeaway

Australia’s smallest companies hold huge potential but face threats from their bigger counterparts, which could gobble them up at any given moment. It’s important to diversify your portfolio because no matter how much of a “sure thing” it is, it never is.

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Motley Fool Contributor Owen Raszkiewicz owns shares in Admedus and Global Health. 

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