3 growth shares to buy for a healthy portfolio 

The healthcare industry has been one of the most successful industries for investors over the last few years and I think every investor would benefit from having one or more of these quality companies in their portfolio.

Ramsay Health Care Ltd (ASX: RHC)

Ramsay has been one of the best performing stocks on the ASX for a long time; it’s up over 416% in the last five years. Ramsay has private hospitals in Australia, the UK, France, Malaysia and Singapore with ambitions to expand into other countries, such as China.

At $15.8 billion in size, Ramsay isn’t small but I think it still has a large growth runway. The aging population tailwinds will help Ramsay for decades and there are many countries that Ramsay can expand into.

Using analysts’ estimates, Ramsay’s FY18 earnings per share are forecasted to be 298.4cps with a dividend of 157.7cps (source: Commsec). This suggests Ramsay shares are currently trading at 26x FY18’s estimated earnings with a forward grossed up dividend yield of 2.9%. Now could be a great time to buy for the long-term investor.

Healthscope Ltd (ASX: HSO) 

Healthscope is the second largest operator of private hospitals in Australia and is a competitor to Ramsay. There is plenty of room in Australia for both of them to thrive. Healthscope has a pipeline of hospitals that it is constructing, which will fuel growth over the coming years.

Healthscope is $5.1 billion in size, a third of the size of Ramsay. Being smaller helps, as each new hospital adds a bigger percentage to Healthscope’s earnings.

Looking ahead, analysts are estimating that by FY18 Healthscope will increase its earnings to 12.8cps and its dividend to 8.8cps. This means Healthscope shares are trading at 23x FY18’s estimated earnings with a forward dividend yield of 2.98%. It could also be a good buy for the long-term investor.

Medibank Private Ltd (ASX: MPL) 

Medibank is Australia’s largest private health insurer, with its Medibank and AHM brands. Since listing at $2 in July 2014, Medibank has risen by 28.5% to today’s price of $2.57.

Investing in a health insurance company is a great way to get diversification in the health industry, as consumers are insuring for all their potential health needs. Compare this to companies such as ResMed Inc. (CHESS) (ASX: RMD) or Cochlear Ltd (ASX: COH) which are focused on only one health issue.

Another bonus for Medibank is that the Australian government wants the private health insurance industry to succeed as it reduces the reliance on the public health sector. The government encourages people to get insurance with the health insurance rebate, the Medicare levy surcharge, and lifetime health cover loading.

Analysts estimate that by FY18 its earnings per share will be 16.5cps and it will pay a dividend of 12.2cps. This suggests Medibank is trading at 15.5x FY18’s estimated earnings with a forward grossed up dividend yield of 6.9%. This could be a good time to buy for the patient investor.

Foolish takeaway

The health industry continues to be one of the best performing sectors and could continue to be in the foreseeable future. The aging population tailwinds, combined with people’s desire to remain healthy and alive should see the above three companies grow over the years.

How 1 Man Made 100x His Money After 50

Few know, that as Warren Buffett blew out the candles on his 50th birthday cake, he had just 1% of his current fortune. Think about it: At an age when most give up hope, Buffett was just getting started on the remaining 99% of his fortune. Goes to show you that it's never too late for you to potentially get rich. Which is why we've gathered the strategies we learned from Buffett, distilled them down to 11 simple lessons, and put it in an exclusive report for you to claim. Just click here to learn more about this handy investing guide.

Motley Fool contributor Tristan Harrison has no position in any stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.