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Will healthcare outperform ASX tech stocks in 2020?

The ASX tech stocks have been strongly outperforming in 2019.

The WAAAX shares – a group of our hottest ASX tech stocks – have been consistently climbing higher to outperform the S&P/ASX 200 Index (INDEXASX: XJO).

This group has been led by Afterpay Touch Group Ltd (ASX: APT), Appen Ltd (ASX: APX) and Xero Limited (ASX: XRO) in 2019.

However, with several healthcare companies also surging to record highs this year, could the Aussie healthcare stocks outperform the ASX tech stocks in 2020?

Why the Aussie tech stocks have been rocketing higher

Afterpay shares have rocketed 168.25% higher this year with the next best WAAAX stocks being Xero (+91.23%) and Appen (+90.70%).

Altium Limited (ASX: ALU) and WiseTech Global Ltd (ASX: WTC) have jumped a tidy 62.12% and 56.19%, respectively.

Strong earnings and consistent growth have been the keys to the ASX tech stock outperformance in 2019.

Appen recently upgraded its earnings for what seems like the millionth time in a year and Afterpay’s AUSTRAC audit report boosted investors spirits this week.

Xero landed its biggest client ever in RSM Australia in October while the WiseTech share price has remained under pressure amid its back and forth with US short-seller J Capital.

But it hasn’t all been smooth sailing for the Aussie tech stocks in 2019. We saw earlier this year how vulnerable the growth companies can be to US–China trade war rhetoric, which is why I think healthcare could be a good sector to rotate into as we enter 2020.

Why ASX healthcare stocks could outperform in 2020

While ASX tech has outperformed in 2019, so too has the ASX healthcare sector.

CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) closed at record highs on the ASX yesterday and have been consistently climbing higher.

The CSL and Cochlear share prices have gained 31.39% and 50.90%, respectively, and both remain well inside the ASX 50.

With concerns over GDP growth and slowing wages, 2020 could be the year to rotate into a countercyclical sector such as healthcare.

Barriers to entry in the form of intellectual property and patents could also help safeguard earnings next year. This could be the key to outperforming the domestic market relative to the ASX tech stocks in 2020.

Where to invest $1,000 right now

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*Returns as of June 30th

Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Cochlear Ltd., and CSL Ltd. The Motley Fool Australia owns shares of Altium, Appen Ltd, WiseTech Global, and Xero. 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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