Ageing populations, fast-growing middle classes and increased government spending all mean the best healthcare businesses should be able to outperform the market long into the future.
Take private hospital operator Ramsay Health Care Limited (ASX: RHC) which has been growing through acquisitions in France and is reportedly now eyeing up acquisitions in Asia, including China. The United Kingdom has also been suggested as another potentially money-spinning private hospital market for Ramsay.
The beauty of the business model is that while hospital costs remain relatively fixed it is able to increase charges (revenues) as demand for its hopsitals' services inevitably increases. This operating leverage suggests fast-growing profits and potentially big returns if management is able to execute on the business model's potential. At $46.27 Ramsay sells for nearly 28 times projected earnings on a 1.7% dividend yield.
ResMed Inc. (CHESS) (ASX: RMD) is a sleep treatment business that has been hit in the past week after a negative report about its potential appeared in a large U.S. investing publication. The report suggested ResMed may suffer if Medicare bodies attempt to cut back their contributory spending on certain home healthcare products. Dancing at shadows is never a good investment approach and ResMed's growth runway remains solid, irrespective of speculative magazine reports. The company also offers Australian investors the bonus of diversification away from the domestic economy. Selling for $5.30 ResMed trades on nearly 21 times projected earnings with a 1.89% yield.
Hearing aid maker Cochlear Limited (ASX: COH) has come under competitive pressures recently as lower-cost rivals take market share. Cochlear's superior technology and products may see it rise again though and it looks an obvious beneficiary of increased healthcare spends. In the hearing aid business reputation as the best is a potentially critical competitive advantage and if Cochlear is able to stay on top it should deliver. Selling for $62.99 it trades on 33 times projected earnings with a 4.1% yield.
Those looking for a speculative micro-cap may do well to consider Uscom Ltd (ASX: UCM), which is a specialist medical and hospital equipment business with plans to make it big. Featuring on the share register is Colin Bell, of the eponymous broker, Bell Potter, while the company is also heavily owned by the founder and employees. It hopes expanding sales of its cardiovascular monitoring technology will see it turn a profit soon, but having posted a loss in the most recent half year, it remains highly speculative.
These businesses have differing prospects, but there's one more I'm confident will beat them all..
