One of the best sectors for long-term investing is healthcare. It has a number of key ingredients for strong, stable growth:
– increasing demand for service from a growing and aging population
– premium pricing for specialised service and
– relatively high barriers to entry for competitors.
New developments in medicine and biotechnology can produce big earnings gains as well. For their defensive qualities and the chance to strike it big with new drugs and devices, ASX healthcare stocks should be a part of every Foolish portfolio.
Sirtex Medical Limited (ASX: SRX) has had great success in growing sales for its targeted liver cancer treatment in the US and is expanding its business in more regions worldwide. Unfortunately, clinical trial results for its SIR-spheres treatment released this week didn't have the desired outcome. Hopes to have it potentially become a first-line cancer treatment have met a setback. This sent Sirtex's stock plummeting over 50% on the announcement.
Now it's trading at about 30x earnings, which is a much better price level compared to the company's most recent earnings growth. The fall in price may be a blessing in disguise for investors waiting for a much better entry price. The clinical trial results don't affect Sirtex's revenue growth trend up to now. You can sometimes pick up attractive bargains when good companies experience short-term trouble.
Another area to consider is the trend towards Australians being more prepared to spend cash on their pets. And one company is positioning to take advantage of this.
Healthcare is not just for humans. Greencross Limited (ASX: GXL) is a great example of mixing pet healthcare services with retailing, although it is primarily a retailer nowadays. Originally, Greencross started out as a growing veterinary service company, buying out single, privately owned businesses to increase its network. Now, it also owns an expanding retail pet supplies chain with the brands Petbarn and City Farmers. This allows it to tap into the growing petcare industry. There is still a lot of room for store expansion across Australia.
People love pets and will spend a surprising amount on their care and health. Analysts expect Greencross to grow earnings an average 19% annually in the next two years. The stock pays a 1.6% yield fully franked. If you like pets, you may just love this stock as well.
