Choosing what to invest in can be a difficult choice when there are literally thousands of businesses out there to choose from.
Some investors just look at the numbers behind the investment such as the price/earnings ratio, the return on equity or the dividend yield. This type of statistical analysis is called quantitative research.
Other investors like to look at long term trends in trying to take advantage of long term growth ideas like the growth of tourism which would benefit Crown Resorts Ltd (ASX:CWN). Other like to look at themes like more advertising revenue going online which benefits Seek Limited (ASX:SEK) and REA Group Limited (ASX:REA). This is called qualitative research.
When you find an investment that looks good with both types of research, you're probably onto a winner if you can buy it at a good price. I think Ramsay Health Care Limited (ASX: RHC), the operator of private hospitals, could be a great business to hold potentially forever. Here are three reasons why:
Ageing population:
The Australian population is going through an unstoppable ageing process thanks to the large baby boomer cohort.
The older a person becomes the more they're likely to need to visit a hospital for some sort of a procedure. This means the potential number of patients for Ramsay is expected to increase over the coming years.
Ramsay is already seeing this trend play out as patient numbers have been growing for a long time and should keep growing for decades to come.
Defensive industry
Some sectors are seen as cyclical whereas others have defensive qualities. Healthcare can definitely be classed as defensive.
People don't choose when to get sick or when they need an operation, it doesn't have much to do with economic cycles. This is good for the business and shareholders as it provides fairly consistent (and hopefully growing) revenue, profit and dividends.
Global presence
Ramsay may be the market leader of private hospitals in Australia, but the key to why it's been one of the best stocks on the ASX over the last decade is its international operations.
It has a foothold in the United Kingdom, France, Malaysia, Indonesia and Italy. This is an impressive list but there are a large number of other countries that could be a great opportunity for Ramsay to expand into.
Risks
The key risk to Ramsay is headwinds for its funding, whether from national governments or private health insurance providers like Medibank Private Ltd (ASX: MPL).
By having diverse operations, it mitigates the risk of one country's government being too big of a hit to operations.
Foolish takeaway
Ramsay could be a great stock to benefit from the ageing tailwinds of the western world. It's trading at 26.6x FY17's estimated earnings with a grossed up dividend yield of 2.43%. For another stock with a growing international presence, but a much bigger dividend than Ramsay, you should check out this stock.
