One area of the market which has performed very positively over the last five years has been the healthcare sector.
Since this time in 2016, the S&P/ASX 200 Health Care index has risen a sizeable 109%. This compares to a ~38% gain by the S&P/ASX 200 Index (ASX: XJO) over the same period, excluding dividends.
The good news for investors is that there are a number of healthcare shares that have been tipped to continue to outperform the market. Two to consider are listed below:
CSL is one of the world’s leading biotherapeutics companies. It has been an exceptionally positive performer over the last five years due to a number of factors.
This includes successful acquisitions, its high level of investment in research and development (R&D) activities, its growing plasma collection network, and its leading therapies and vaccines.
In respect to its therapies, CSL’s portfolio includes lucrative and life-saving products such as Privigen, Hizentra, Idelvion, and Afstyla. These will be added to in the coming years thanks to its almost billion-dollar annual investment in R&D.
While the pandemic has hit plasma collections and could lead to elevated costs in the near term, this headwind is only expected to be temporary. In light of this, a number of brokers believe recent weakness in the CSL share price is a buying opportunity for investors.
One of those is Credit Suisse. Last month the broker upgraded the company’s shares to an outperform rating with a $315 price target.
Mach7 Technologies Ltd (ASX: M7T)
At the small end of the healthcare sector you’ll find Mach7. It is a medical imaging data management solutions provider which uses software to create a clear and complete view of the patient. Management notes that this helps users with their diagnoses, reduces costs, and improves outcomes.
Last year Mach7 announced the acquisition of Client Outlook for A$40.9 million. The acquisition of the leading provider of an enterprise image viewing technology has not only expanded its offering but also its addressable market. The company now estimates that it has a US$2.75 billion market opportunity to grow into. This is significantly more than its current annualised recurring revenue (ARR) of $10.2 million.
Analysts at Morgans are very positive on the company’s prospects. The broker believes that its solutions are well-placed in the current environment where demand for telehealth is growing fast. Morgans currently has an add rating and $1.68 price target on the company’s shares.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends MACH7 FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended MACH7 FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.