2 healthcare ASX shares that Morgans loves right now

COVID-19, Delta, Omicron… Health is the topic du jour. Here’s a pair of stocks that are set to take advantage.

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doctor and nurse smiling in a hospital ward representing rising share price

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Health is a topic that’s never been far from everyone’s minds in the past 18 months, so it’s worth looking at ASX shares that are contributing to our wellbeing.

Each month investment firm Morgans publishes its “best ideas”, as analyst Andrew Tang explained.

“Our best ideas are those that we think offer the highest risk-adjusted returns over a 12-month timeframe supported by a higher-than-average level of confidence,” he said in the December ‘best ideas’ memo.

“They are our most preferred sector exposures.”

There are 2 healthcare ASX shares in Morgans’ latest list that caught our eye:

Volatile short term but excellent long term

Breathing apparatus maker Resmed CDI (ASX: RMD) is a December buy for Morgans.

That’s not to say the stock won’t be up and down over the next year or so.

“The next few quarters will likely be volatile, as COVID-related demand for ventilators continues to slow and core sleep apnoea volumes gradually lift,” said Tang.

“[But] nothing changes our medium/longer term view that the company remains well-placed as it builds a unique, patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.”

Medallion Financial managing director Michael Wayne agreed, telling The Motley Fool last week that Resmed shares are a “core position” that his clients are “comfortable” holding.

“They’re growing at double digit revenue growth and earnings growth. Margins are very, very strong.”

Although it’s pulled back about 10% from its September highs, Resmed shares have still gained more than 31% for the year to date.

No end in sight for COVID-19 tests

International pathology services provider Sonic Healthcare Limited (ASX: SHL) was one of the best-performing health ASX shares last month.

“After a poor start to the month, shares in ASX healthcare giant Sonic Healthcare finished the month 7% in the green,” reported The Motley Fool’s Zach Bristow.

“Robust demand for COVID-19 tests and vaccinations bumped the company’s sales and earnings during the quarter.”

With the Omicron emerging in recent days, Tang has no doubt this activity will continue to bring in revenue.

“We see COVID-19 testing continuing into the foreseeable future, with growth potential in COVID serology testing.”

He added Sonic’s international core business is “increasingly resilient”. 

“Strong balance sheet — gearing 21.6x, $1.3 billion headroom — [opens] the door to acquisitions, contracts and JVs.”

Sonic shares closed the week at $42.62, up almost 30% for the year.

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Motley Fool contributor Tony Yoo owns shares of ResMed Inc. 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 recommended ResMed Inc. and Sonic Healthcare 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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