Goldman Sachs just added this ASX healthcare share to its conviction buy list

This healthcare share could be a strong buy..

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If you’re interested in gaining some exposure to the healthcare sector, then you may want to look at Healthco Healthcare and Wellness REIT (ASX: HCW) shares.

It is the latest addition to the Goldman Sachs conviction list with a buy rating and $2.56 price target.

This implies potential upside of ~15.5% for Healthco Healthcare and Wellness REIT shares over the next 12 months.

And with Goldman forecasting an attractive 3.3% dividend yield, the potential return stretches to almost 19%.

What is the Healthco Healthcare and Wellness REIT?

Healthco Healthcare and Wellness REIT owns a portfolio of healthcare and wellness assets predominantly on the eastern seaboard states.

Goldman Sachs believes it provides a good mix of defence plus offense given the external growth runway. In respect to defence, the broker notes that it has a weighted average lease expiry of ~9.4 years and strong tenant covenants in sub-sectors that are majority government-backed.

Whereas on the offense, the broker notes that the healthcare real estate sector in Australia is in its infancy, providing scope for a large runway for growth through acquisitions and ground up development.

Another reason Goldman is positive is its exposure to sub-sector mega trends.

It commented: “We believe the opportunity set for healthcare related assets is expansive and is underpinned by key mega trends within Australia: 1) Australia’s ageing population, 2) growing government expenditure, 3) technological improvements, and 4) the increasing consumption of health-related services. The company estimates an additional ~A$87bn of investment into healthcare property will be needed over the next 20 years, adding to the current ~A$218bn asset base.”

“We initiate coverage with a Buy (add to CL), given HCW’s strong balance sheet, attractive industry fundamentals and runway for external growth in its portfolio,” it concluded.

Should you invest $1,000 in Healthco Healthcare and Wellness REIT right now?

Before you consider Healthco Healthcare and Wellness REIT, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Healthco Healthcare and Wellness REIT wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor James Mickleboro 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 has no position in any of the stocks mentioned. 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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