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Should you buy these healthcare shares?

One of the best performing areas of the 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 managed to put on a gain of almost 27%.

While I wouldn’t necessarily expect the sector to replicate this gain over the next 12 months, thanks to Australia’s ageing population and increasing chronic disease burden I still believe it could continue to outperform the rest of the market.

With that in mind, should you buy these three healthcare shares?

CSL Limited (ASX: CSL)

The strong performance of this biotherapeutics company’s shares over the last 12 months have played a key role in taking the S&P/ASX 200 Health Care index higher. While this leaves its shares close to an all-time high, I don’t think it is too late to invest if you’re prepared to hold them for the long-term. However, if you’re more focused on the short term you might want to wait in hope of a pullback in its share price before investing.

Nanosonics Ltd (ASX: NAN)

I’m a big fan of this infection control specialist and believe it could have a very bright future ahead of it. Especially given its plan to release complementary products in the near future that will both boost and diversify its revenue. One thing of note, though, is that the company is currently being targeted by short sellers and is one of the most shorted shares on the Australian share market. It is unclear why short sellers have taken an interest, which does leave me concerned that they know something that I don’t. Because of this, I’m staying clear of Nanosonics until short interest fades.

Ramsay Health Care Limited (ASX: RHC)

Ramsay Health Care is one of the world’s leading private hospital operators. Whilst I am a huge fan of Ramsay and would love to have it in my portfolio, I’m keeping away from the company until its shares are trading at a level more befitting of its current growth profile. At present Ramsay’s growth is being held back by weakness in Europe and falling private hospital coverage here in Australia.

Instead of Ramsay, I would be buying CSL or one of these top four stocks.

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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 Nanosonics Limited. The Motley Fool Australia has recommended Ramsay Health Care 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 Scott Phillips.

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