Since early April 2014, these three healthcare stocks have climbed more than 50%, substantially better than the S&P/ASX 200's (Indexasx: XJO) (ASX: XJO) 10% gain.
The three stocks are Capitol Health Limited (ASX: CAJ), Lifehealthcare limited (ASX: LHC) and Paragon Care Ltd (ASX: PGC). Over the past year, they have gained 62%, 50.2% and 84% respectively.
You could've even bought these stocks in October 2014 and still seen strong gains of 80%, 68% and 48% from the 3 stocks respectively.
The reason why these three stocks have soared is primarily because they were overlooked by most of the market. And that's despite myself and other writers highlighting their potential since their early days.
We wrote an article for Fairfax back in December 2013 highlighting the attraction of LifeHealthcare, a highly specialised distributor of medical devices used in spine surgery and neurosurgery, among others. At the time, shares were trading at $2.12. They are currently at $3.49, and shareholders have received fully franked dividends along the way as well.
Who said markets were efficient?
Nowadays, diagnostics imaging provider Capitol Health sports a market cap of more than $560 million, as other investors have discovered the company and its strong potential, growing revenues organically and through sensible acquisitions has helped too. We thought it was a good stock to add to your watchlist in May 2013 – at the time shares were trading around 23 cents – they are now $1.08.
With a growing population and high demand for aged care, Paragon Care is likely to benefit for many years. The company provides equipment and furniture widely used in aged care homes and hospitals.
With Lifehealthcare and Capitol Health trading on trailing P/E ratios of 19.7x and 55x respectively, much of the easy gains are already gone. That's not to say they won't beat the market from here, just that their job is much more difficult. Paragon Care, on the other hand, still looks fairly cheap, trading on a trailing P/E ratio of 14.3x.
