The Ramsay Health Care Limited (ASX: RHC) share price has been an underperformer over the past year. During the last 12 months, shares in the healthcare facility operator have traded sideways, gaining ~2%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has dished out a 23.7% return to investors over the same period.
Although, one fund manager is betting on the tide turning as COVID-19 restrictions ease across its operating geographies.
Let's take a look at why Sydney-based Perennial Partners are bullish on the Ramsay Health share price.
A big backlog filtering through
Firstly, the Perennial Value Australian Shares Trust invests in a broad swathe of ASX shares, with the aim of outperforming the S&P/ASX 300 Accumulation Index on a rolling 3-year basis. At the end of August, the trust held $761 million in funds under management.
To outperform the index, the fund must attempt to balance its investment weightings better than the index itself. As such, compared to the index, the Perennial Value fund is underweight on Rio Tinto Limited (ASX: RIO), Transurban Group (ASX: TCL), Goodman Group (ASX: GMG), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and Afterpay Ltd (ASX: APT).
On the contrary, there are several ASX-listed companies in which the fund sees greater upside potential. One of these shares is Ramsay Health Care. As a result, the Perennial Value fund is overweight with Ramsay when comparing to its benchmark index.
In the near term, elective surgery restrictions in Australia are impacting the healthcare company's earnings. However, looking beyond this, the fund points out a likely bounce back in surgical volumes once restrictions lift.
Providing justification, Perennial drew attention to the increase in volumes in Ramsay's United Kingdom operations. Considering the UK is largely open again, procedures deferred by COVID-19 are now being tended to.
According to the Australian Institute of Health and Welfare, the median waiting time for elective surgery in Australia for 2019-2020 increased to 77 days from 66 days. On a similar note, The Age recently reported a significant blowout in Victoria's hospital waiting lists.
Specifically, the state's elective surgery waiting list has reached more than 65,000 people – with more than 30,000 procedures being cancelled last year.
Positioning for upside in Ramsay Health share price
The Perennial fund is putting its (investors') money where its mouth is. According to the trust's activity in August, the fund took profits in some of its outperforming holdings and redirected that capital elsewhere.
In gearing up for a reopening boom, Perennial allocated those proceeds to several ASX shares, including Ramsay Health.
The Ramsay Health share price finished the Monday trading session at $69.28.
