4 healthcare shares every portfolio should have

A lot of businesses can be described as being growth shares or defensive shares. It’s rare for a business to have growth and defensive qualities.

Healthcare businesses have a wonderful trait of having defensive earnings due to people’s willingness to spend what it takes to remain alive and well. It’s also defensive because people’s health doesn’t follow economic patterns.

A lot of healthcare businesses are growth stocks because they are coming up with cutting-edge technology and the world’s demographics are steadily ageing.

Here are four healthcare businesses I think should be in every portfolio:

Cochlear Limited (ASX: COH)

Cochlear is the company behind the hearing implant. It transforms people’s lives when used and that makes it a very valuable item for customers. The business is also growing its recurring revenue which is a good move.

Cochlear is currently trading at 39x FY17’s estimated earnings.

Ramsay Health Care Limited (ASX: RHC)

Ramsay is one of the biggest private hospital operators in the world. The number of people visiting a hospital is expected to increase over the coming years, this should be a big boost to Ramsay thanks to the ageing demographics.

It’s currently trading at 27x FY17’s estimated earnings.

CSL Limited (ASX: CSL)

CSL is the vaccine, pharmaceutical and plasma product health giant of Australia. Its high level of research and development ensures that it is always coming up with another treatment that can be sold. It has been one of the best blue chips to own over the past five years.

It’s currently trading at 35x FY17’s estimated earnings.

Sonic Healthcare Limited (ASX: SHL)

Sonic is one of the largest pathology businesses in the world with operations in Australia, New Zealand, the UK, Ireland, Belgium, Germany and the USA. The growing demand for healthcare should see Sonic remain as a top performer.

It’s currently trading at 21x FY17’s estimated earnings.

Foolish takeaway

None of these shares are cheap. Quality and defensive earnings do not come cheaply. I think all four are worthy of being in any portfolio, but I think Cochlear and CSL are a little too expensive at the moment. Ramsay would be my preferred long-term buy at the current prices.

However, all of them have quite low dividend yields. If you’re looking for growth and dividends then these stocks could be the perfect additions for you.


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Motley Fool contributor Tristan Harrison owns shares of Ramsay Health Care Limited. 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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