Your instant 5 share healthcare portfolio

Credit: PerformanceHealth

In my opinion, every Australian investor should have healthcare and biotechnology stocks in their portfolio

Not only does Australia have a proven knack for producing great healthcare companies, but the industry is expected to be one of the key growth areas for the Australian economy for many years.

But if that wasn’t enough, these businesses usually have many other appealing characteristics, including:

  • Sticky revenues
  • Defensive earnings
  • Easily defined markets
  • Competitive protection, in the form of property rights
  • Wide profit margins, and
  • Global applications

If you’re stuck for ideas or don’t know where to start your search, here are five ASX healthcare companies I’d happily add to my portfolio today.

  1. Cochlear Ltd (ASX: COH) is the Australian hearing aid developer with a global presence. The Nucleus and bone-anchored range of devices, together with their accessories, are best-in-class. Reporting in US dollars, the $5.3 billion company is headquartered in Sydney but does a majority of its business in foreign markets.
  2. After many years of growth, CSL Limited (ASX: CSL) is one of Australia’s biggest and best companies. The biopharmaceutical giant is involved in the research, development, manufacture and distribution of blood plasma products that treat complex diseases. Despite recently climbing back over $100 per share, CSL looks a good buy for the long term.
  3. The $10.6 billion ResMed Inc. (CHESS) (ASX: RMD) is dual-listed on the ASX and New York Stock Exchange (NYSE). Like the two aforementioned companies, ResMed does a majority of its business overseas and reports in USD, so strength in the global economy (relative to the local economy) could see revenues and earnings enjoy a healthy upswing if the Australian dollar continues to fall. ResMed designs, develops and markets devices for the treatment of sleep apnoea and related respiratory disorders.
  4. Somnomed Limited (ASX: SOM) is significantly smaller than ResMed, and its devices for treating sleep apnoea cost significantly less. Somnomed’s SomnoDENT is a mouthguard-like device that overcomes many of the difficulties of using ResMed’s larger and more sophisticated Automatic Positive Airway Pressure (APAP) and Continuous Positive Airway Pressure (CPAP) machines. Somnomed is a global leader in Continuous Open Airway Therapy (COAT).
  5. Nanosonics Ltd. (ASX: NAN) produces decontamination and infection control devices, such as Trophon EPR. Despite not yet being profitable, the $462 million Nanosonics has global growth potential, with a large addressable market and a leading product at its disposal.
Data sourced from CapitalIQ.

Data sourced from CapitalIQ.

Buy, Hold or Sell?

At today’s prices, I think each of the five companies are a buy. If I had to choose my favourite for new money it’d be CSL among the blue chips, and Somnomed for the small-caps.

Before you rush out to buy CSL...

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Motley Fool writer/analyst Owen Raszkiewicz owns shares of CSL, Cochlear and ResMed. 

Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

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