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Why Sigma Healthcare shares have surged 25% higher in November

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Sigma Healthcare Ltd (ASX: SIG) shares have been one of the top performers throughout the month of November.

It’s been a rollercoaster of a ride for much of the ASX 200 this month. The S&P/ASX 200 Index (INDEXASX: XJO) fell lower in the first week before climbing towards a new record high late in November.

Sigma shares have been one of the key contributors as the Aussie healthcare stock has rocketed 25.86% higher to $0.73 per share.

Why were Sigma shares so successful in November?

The biggest factor driving Sigma shares towards their new 52-week high valuation has been a mooted deal with My Chemist/Chemist Warehouse Group (MC/CW Group).

Sigma confirmed talks with the Aussie pharmacy group in early November and said it could resume the supply of fast-moving consumer goods (FMCG) to MC/CW Group.

This announcement saw Sigma climb higher on the ASX in early November while a further update put the icing on top.

On 25 November, Sigma confirmed that it had signed a major first-line agreement with MC/CW Group. The agreement is effective from 1 December and is expected to reach full run rate by July 2020.

Sigma shares climbed higher on the news and have been continuing their strong run throughout this week.

Despite some initial costs for transitioning the agreement, management expects positive earnings benefits from the new deal.

Are there other ASX healthcare stocks I could buy?

While Sigma shares have been performing strongly this month, so too have a number of ASX 200 healthcare companies.

CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) are continuing to race higher despite their already-lofty valuations.

Likewise, the Sonic Healthcare Ltd (ASX: SHL) share price is one to watch after continuing to set and smash its own record highs.

The ASX healthcare sector looks to be charging higher on strong earnings and investor demand for non-cyclical stocks in 2019.

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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 Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Sonic Healthcare 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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