One area of the market which I think has extremely bright long-term growth potential is the healthcare sector.
Growing and ageing populations, increased chronic disease burden, and the development of better treatments are all expected to be major tailwinds for the sector over the next couple of decades.
Three healthcare shares which I expect to benefit from these tailwinds and could be destined to outperform the market are listed below. Here’s why I like them:
Cochlear Limited (ASX: COH)
As the global population ages, I expect demand for hearing products will grow strongly. This will no doubt be music to the ears of this hearing solutions company. Thanks to the quality of its products and its wide distribution network, I believe Cochlear will benefit greatly from the trend. This could put Cochlear in a position to continue delivering above-average profit growth for many years to come.
CSL Limited (ASX: CSL)
This biotherapeutics company would have to be my favourite healthcare company by some distance. In fact, I would go so far as to say that it is arguably one of Australia’s highest quality businesses and a must buy for investors. CSL’s shares have provided strong returns for investors over the last couple of decades and I expect more of the same in the future thanks largely to the strength of its core business. While its shares may look expensive on paper, it is worth remembering that the way it does its accounting artificially inflates its PE ratio. Adjusting accordingly, I think they are about fair value for its current growth profile.
Volpara Health Technologies Ltd (ASX: VHT)
This breast imaging analytics and analysis product provider is one of my favourite options at the small end of the sector. Although being a small cap share it carries a lot more risk than Cochlear and CSL, I think it has enormous potential that gives an investment a compelling risk/reward. According to its latest update, thanks to the growing popularity of its product, approximately 3.2% of all women screened in the United States for breast cancer are now contracted to Volpara’s software.
If you like exciting up and coming shares like Volpara then I think you'll love these stars of the future.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of VOLPARA FPO NZ. The Motley Fool Australia has recommended Cochlear Ltd. 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 Scott Phillips.