Top fund manager identifies 5 healthcare shares as potential winners

Credit: Pictures of Money

Over the past five years the share price of listed investment company Bki Investment Co Ltd (ASX: BKI) (which was spun-out of Brickworks Limited (ASX: BKW) back in late 2003) has posted gains totalling 32.5% compared with a gain of just 3.6% in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

The underlying performance of the portfolio has also been impressive with outperformance against its relative benchmark over the long term.

Given BKI’s track record, the company’s stock picks are arguably worth monitoring. Here are five healthcare stocks which BKI’s management recently singled out:

  1. Primary Health Care Limited (ASX: PRY)
  2. Sonic Healthcare Limited (ASX: SHL)
  3. InvoCare Limited (ASX: IVC)
  4. Ramsay Health Care Limited (ASX: RHC)
  5. Regis Healthcare Ltd (ASX: REG)

In my opinion these five stocks could each make worthy additions to a long-term portfolio at current prices, here’s why…

Primary – while this company has been plagued by a number of negatives over recent years, there is now arguably one big positive, price.

With the share price down 46% in the past 12 months, the stock is trading on a forecast price-to-earnings ratio of just under 11 times and with a forecast dividend yield of just under 5.8%.

Sonic – many Australian investors are overly exposed to the domestic economy and their portfolios could benefit from global diversification.

Sonic has built an impressive global footprint of pathology and radiography businesses and currently trades on a reasonable multiple of approximately 17 times.

InvoCare – The economics of InvoCare’s funeral business are appealing and deserving of a premium price for the stock. While it’s no bargain, owning a slice of this quality company should be a secure long-term investment.

Ramsay – Like Sonic, this hospital operator has built an impressive global footprint and like InvoCare this has attracted a premium market price. Once again the dynamics of the private hospital sector and the quality of the group’s management and assets suggest that Ramsay should make for an appealing long-term investment too.

Regis – Regis is one of a number of recently listed companies catering to the aging population via the provision of aged care services and accommodation.

The group would appear to have a long runway of growth opportunities ahead of it with consensus data from Morningstar forecasting a jump of around 30% in earnings per share from 2016 to 2017 which would suggest the high multiple is justified.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. 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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