I think it’s important to find businesses these days that can perform well whatever the economic climate is.
I believe healthcare shares could be a good option to consider because demand for health services continues throughout all parts of the economic cycle.
It might be a better idea to think about smaller businesses that have more growth potential over the coming years.
Here are two ASX healthcare shares to consider:
Volpara Health Technologies Ltd (ASX: VHT)
Volpara describes itself as a medical technology company with artificial intelligence algorithms to assist with the early detection of breast cancer.
One of the best reasons to like Volpara is that it has a gross margin of around 83% with a relatively fixed cost base. Many of the leading tech shares on the ASX and abroad have this setup, the business just needs to reach profitability and then extra money is mostly just adding to the bottom line.
After its MRS Systems acquisition its market share has increased to around 25%, with the company being on track for annualised recurring revenue (ARR) of NZ$14.6 million for FY20.
The next 12 months could be transformative for Volpara’s financials.
Paragon Care Ltd (ASX: PGC)
Paragon is the only healthcare share I own, it’s a small cap healthcare product distributor of items like beds, devices and surgery equipment. I like that it’s a way to indirectly benefit from the many different illnesses in hospitals. It also supplies other healthcare clients like aged care facilities.
There is a large market for healthcare supplies, Paragon can be a substantial winner if can attract customers by offering good service with attractive prices due to economies of scale.
It’s trading at around 10x FY20’s estimated earnings.
If the sale of Paragon’s legacy capital business returns Paragon back to profitable growth then it seems like it’s at an attractive price for a value buy. The fact it has a good dividend yield could also help returns.
Where to invest $1,000 right now
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Motley Fool contributor Tristan Harrison owns shares of Paragon Care Limited. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia has recommended Paragon 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.