Why this fundie says Estia Health (ASX:EHE) shares are a smart pick for 2022

Here’s why this fundie is bullish on the aged care provider’s stock.

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The future looks bright for the Estia Health Ltd (ASX: EHE) share price, according to one expert.

Wilson Asset Management portfolio manager Tobias Yao is backing the aged care provider’s stock for the coming year.

At the time of writing, the Estia Health share price is $2.18.

Let’s take a look at what aspects of Estia Health appeals to the fundie.

Are Estia Health shares a buy for 2022?

Yao is backing the Estia Heath share price for 2022, stating the aged care sector could be in for a golden year.

Yao told Livewire the sector has had a rough trot recently, but it’s poised to boom – and he believes Estia is a particularly “efficient operator” within it.  

As Yao pointed out, the aged care industry was recently the focus of a Royal Commission. It was also hit hard by the COVID-19 pandemic.

The Royal Commission into Aged Care Quality and Safety’s findings were handed down in March. They included recommendations of minimum qualifications and an increased award rate for aged care staff, as well as the fact that aged care facilities should always have a registered nurse on-site.

Additionally, in its financial year 2021 results, Estia stated all its facilities were impacted by COVID-19 over the 12 months ended 30 June. Victoria’s second wave of infections saw occupants testing positive for the virus at 11 of Estia’s facilities. Sadly, the outbreak resulted in 36 deaths among Estia’s residents.

However, the space now looks to be a hotbed for takeovers and potential government funding, says Yao.

Estia’s formerly ASX-listed aged care peer, Japara Healthcare was recently taken over. Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) also attempted to takeover aged care operator Regis Healthcare Ltd (ASX: REG) last year.

Finally, Yao is bullish on the aged care stock following the most recent federal budget. Within it, the federal government committed to provide $3.5 billion to the sector each year for the next 5 years.

The Estia share price is already boasting a strong recent run. It has gained 23% since the start of 2021.

Should you invest $1,000 in Estia Health right now?

Before you consider Estia Health, you'll want to hear this.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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