My 3 favourite healthcare shares to buy now

The healthcare sector is one of the most attractive to me out of all the industries.

It provides a defensive yet growing source of earnings because people don’t choose to get sick around economic cycles and are willing to pay almost whatever it takes to become healthy and stay healthy.

The ageing demographics of Australia also means the healthcare sector is likely going to be utilised more as time goes on.

Here are three of my favourite shares to benefit from the healthcare sector, without focusing on one particular health issue:

Ramsay Health Care Limited (ASX: RHC)

Ramsay is one of the biggest private hospital operators in the world with operations in Australia, the UK, France, Malaysia, Italy and Indonesia.

It has been one of the best businesses to own on the ASX over the last two decades and I don’t see that changing any time soon.

It has a continuous expansion pipeline that could boost growth in future years, one example of this is its St Andrew’s Private Hospital development in Ipswich.

I expect Ramsay could be one of the best stocks to own over the next two decades as the population continues to age.

Ramsay is currently trading at 24x FY18’s estimated earnings with a grossed-up dividend yield of 2.59%.

Healthscope Ltd (ASX: HSO)

Healthscope is the second-biggest operator of private hospitals in Australia. It also has a reasonably small presence overseas in New Zealand, Singapore and Malaysia.

It has a large construction plan that will add another 792 beds to its total by FY19. Its biggest project is the Northern Beaches Hospital in Sydney which will add 450 beds.

The share price has declined by 32% since this time last year and I think this makes it a good long-term buy to hold for many years.

Healthscope is currently trading at 17x FY18’s estimated earnings with an unfranked dividend yield of 3.66%.

NIB Holdings Limited (ASX: NHF)

NIB is the second largest ASX-listed private health insurer. It has been growing its policyholders by an impressive amount each year and has taken most of the growth of the overall industry.

Its share price has come under heavy pressure over the last three weeks, falling by 16%. First it was reported that health insurers had an increase in hospital-related claims and this week the ACCC filed a lawsuit against NIB.

I think both of these issues are short-term in nature and NIB will overcome them. I think the share price will follow a similar path to Crown Resorts Ltd (ASX: CWN) and steadily recover as investors digest the news.

NIB is currently trading at 19x FY18’s estimated earnings with a grossed-up dividend yield of 4.61%.

Foolish takeaway

Ramsay is by far my favourite of the three, its quality is undeniably strong. However, it’s trading at the highest multiple of the three, so it isn’t the cheapest. Healthscope is trading at all-time lows, so I think it could also be a good option.

At the current prices, I think all three are worth buying as long as you hold for several years and allow the ageing demographics to come into effect.

If you aren't a fan of the healthcare sector then these stocks may be better investment choices for you.

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Motley Fool contributor Tristan Harrison owns shares of HEALTHSCPE DEF SET and Ramsay Health Care Limited. The Motley Fool Australia owns shares of Crown Resorts Limited. 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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