I have taken a strong interest in healthcare stocks since I found out that the big healthcare companies have smashed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the last five years.
Given the projections for growing life expectancies it is reasonable to assume that healthcare demand will continue well into the next decade.
With such a wide range of companies to choose from here are four healthcare companies I think could be long-term winners.
Health insurance provider NIB Holdings Limited (ASX: NHF) grew earnings per share (EPS) by 8.8% last financial year (FY15) and is on track to continue this momentum into the 2016 financial year (FY16). The company’s guidance is for operating profit in the range of $85-$90 million, an increase of up to 10% on the year just gone and it has a nice dividend yield of 3.8%.
To balance the exposure to health insurance I would add Capitol Health Ltd (ASX: CAJ) to the portfolio. Capitol Health is following a ‘roll up’ acquisition strategy for diagnostic imaging centres, a strategy currently loathed by many investors.
Imaging centres are where you go when you need X-rays, CT scans, MRI scans or ultrasounds and Capitol Health grew revenue 23% in FY15, of which 8% was from organic demand. Heading into FY16 the company expects to maintain its strong performance.
Healthcare Information Technology (HIT)
Information technology is essential to transform the healthcare industry from a lethargic paper mess to an efficient machine. A number of companies are helping to lead the way here, from profitable local provider Global Health Limited (ASX: GLH) to Kiwi operator Orion Health Group Ltd (ASX: OHE) which has been winning big contracts in the U.S.
While my dream healthcare portfolio would include breathing device maker Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), at a current price-to-earnings ratio of 32 the company commands a significant price premium compared to the S&P/ASX 200 Health Care Index on 27.
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Motley Fool contributor Regan Pearson owns shares in Global Health Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.