While the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is now around its highest level of the last 12 months, there are plenty of quality companies which have recently been sold off and remain down 20% or more.
Most notable has been the selloff in healthcare stocks. The S&P/ASX 200 Health Care Index (Index: ^AXHJ) (ASX: XHJ) is down nearly 10% over the last three months, versus a gain of 4% for the broad ASX 200 on the back of strength in the major banks and miners.
Prior to the recent weakness, healthcare stocks easily outperformed most other sectors on the ASX over the last five years.
The next decade or more should see key healthcare stocks continuing to benefit from the growing needs of an ageing population. With this in mind, the recent price weakness could provide some good opportunities for investors looking to increase their exposure to this important sector.
The following five stocks are currently on my watch list:
CSL Limited (ASX: CSL)
Shares in the legendary healthcare company are back below $100 and down nearly 20% from their all-time high. With slowing growth, shares are still not in bargain territory, but possibly at a decent entry point for long-term investors looking for exposure to this world-class innovator.
Cochlear Limited (ASX: COH)
Cochlear shares have been recovering in recent trading, but remain down around 17%. Analysts expect further growth in earnings and dividends over the next few years, with the potential for an additional boost in the event of continued Australian dollar weakness, thanks to Cochlear’s exposure to foreign markets. At around $120, shares represent good value for long-term investors.
Healthscope Ltd (ASX: HSO)
Healthscope operates private hospitals and medical centres. Shares are down nearly 30% after recent patient growth was lower than expected. A current P/E ratio of around 20 and a yield of 3.3% suggests decent value only if Healthscope can get its growth back on track.
Ramsay Health Care Limited (ASX: RHC)
Also a hospital operator, Ramsay shares have fallen 20%. Ramsay trades at a higher earnings multiple of around 25, which reflects its superior international assets and growth profile. Ramsay has demonstrated incredible dividend growth over the last two decades. In my view, there is plenty more to come, and Ramsay is a great company to buy on price weakness like we are currently seeing.
Sonic Healthcare Limited (ASX: SHL)
The share price in dividend aristocrat, Sonic Healthcare, has been more resilient than its peers in the healthcare sector; but it has still fallen 11% from its highs. With a forward yield of around 3.7% and solid prospects for further growth, it is a worthy inclusion in the portfolio of any dividend investor.
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As of 2.11.2020
Motley Fool contributor Matthew Bugden 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.
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