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3 top healthcare shares I want in my portfolio

One of the best performing areas of the Australian share market over the last 12 months has been the healthcare sector.

During this time the S&P/ASX 200 Health Care (Index: ^AXHJ) (ASX: XHJ) has gained a remarkable 28% compared to a 4.7% gain by the benchmark S&P/ASX 200.

Whilst I wouldn’t necessarily expect the healthcare sector to deliver returns like this again over the next 12 months, I do believe it has the potential to outperform again.

This is because demand for healthcare services is expected to rise considerably over the next decade thanks to ageing populations, increased chronic disease burden, and advances in treatments.

With that in mind, here are three healthcare shares I would consider buying this month:

Cochlear Limited (ASX: COH)

As people age their hearing will invariably fade. This should mean that the market that this leading hearing solutions company operates in will expand significantly over the next decade or two as the number of people aged over 65 balloons globally. Thanks to Cochlear’s global footprint and market-leading products I feel it is well-positioned to profit, making it one of the best buy and hold options in the healthcare sector.

Pro Medicus Limited (ASX: PME)

This healthcare technology company could be worth a closer look thanks to its increasingly popular Visage 7 and Visage RIS platforms. The Visage 7 software is the main attraction for me. It provides radiologists and referring physicians with fast server-side rendered images streamed via an intelligent thin-client viewer, allowing users to have a customised protocol-driven workflow to natively view multi-dimensional imagery and a patient’s complete imaging history. Demand for the software has been growing and I expect it to remain the case in FY 2019 and beyond.

Volpara Health Technologies Ltd (ASX: VHT)

I think that Volpara Health Technologies is arguably one of the best small cap healthcare shares on the local market. I have been very impressed at the way its breast imaging analytics and analysis software has been winning market share in the United States. The company recently advised that its share had grown ahead of expectations to 3.2%. This resulted in annual recurring revenues growing over 200% year-on-year in FY 2018. Its shares have rallied quite strongly over the last 12 months, though. So this does leave it exposed to downside risk if its strong growth hits a speed bump.

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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 and has recommended PRO Medicus Ltd. and 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.

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