MENU

2 healthcare shares worth long-term buys

The healthcare industry is one of my favourite industries. It’s proven to be one of the best sectors to be invested in over the last five years and I think the next five years will be fruitful too.

There’s a wide range of healthcare shares on the ASX from giants like CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) to smaller growth shares like Nanosonics Ltd (ASX: NAN).

However, most of these healthcare businesses focus on a small area of the overall healthcare treatment process. It could be possible for a competitor to produce a better service.

I think private hospitals are a good way to get diversification to all the different health issues.

Healthscope Ltd (ASX: HSO) and Ramsay Health Care Limited (ASX: RHC) are Australia’s two largest private hospital operators and I think both are them are worthy of consideration for an investment.

Ramsay is a global private hospital business with large operations in Australia, France and the UK.

The vast majority of Healthscope’s business operations are in Australia, although it does have a small presence in Asia.

Both Ramsay and Healthscope should have good futures because the number of over-65s is expected to increase by 75% over the next two decades. This should provide a large boost to patient numbers over this time period.

The number of over-65’s increasing by such a high percentage gives both private hospital operators strong tailwinds because it’s the oldest generation that are most likely going to visit a hospital. The oldest generation are also the wealthiest and most likely to have the finances needed for private health insurance.

Over the last five months the share prices of Ramsay and Healthscope have fallen by 4% and 5% respectively. I believe that this has created good value for prospective investors, even if the share price has recovered somewhat over the last few weeks.

I expect that the government will try to assist the private health insurance sector one way or another. There have already been a few small announcements such as cheaper prices for younger policyholders.

If the private health insurance uptake increases again then Ramsay and Healthscope could recover nicely.

Foolish takeaway

Ramsay is currently trading at 24x FY18’s estimated earnings with a grossed-up dividend yield of 2.75%. Healthscope is currently trading at 20x FY18’s earnings with an unfranked dividend yield of 3.47%.

I think both shares would make a good long-term buy at today’s prices and I’m happy to be a shareholder for many years to come.

Other shares that I think would make good long-term buys are these shares.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

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

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.