With so many uncertainties in 2023, 'structural growth' seems to be the hot buzz term in investing at the moment.
Inflation is still raging, higher interest rates are bearing down on businesses and consumers, and many experts reckon the global economy is about to put the brakes on very soon.
Those barracking for 'structural growth' ASX shares are taking the logic that those businesses will be more resistant to short-term calamities because they have long-term trends driving their earnings.
Pengana investment specialist Tim Richardson recently named ageing population as one of his drivers of structural growth.
"Ageing populations in developed economies and Asia will support spending on healthcare, including medical insurance, care facilities, and pharmaceutical development."
Tribeca portfolio manager Jun Bei Liu agreed that healthcare is a theme worth backing at the moment.
"In this environment, you need to find some of the structural defensive growth leaders. We like the healthcare sector," she said at a GFSM briefing in Sydney on Tuesday.
Don't just buy any old healthcare stock though
It's critical not to go all-in on a particular sector though. Bottom-up analysis is crucial in 2023 for stock picking, according to Liu.
"The challenge [for healthcare] is they do have that foreign US dollar sort of exposure. As the US dollar becomes weaker, the earnings will fall."
Liu named two particular ASX shares in health that she loves at the moment: Ramsay Health Care Ltd (ASX: RHC) and CSL Limited (ASX: CSL).
Ramsay shares plunged last year after a private equity consortium led by KKR cancelled a takeover bid.
That just gives it a mouth-watering entry point, as far as Liu is concerned.
"I always say this company is something I put my mother's money in — and I do.
"It's very defensive. It's going into an earnings upgrade cycle with double its earnings because of hospitals reopening. It's got assets — something like $1 billion — they can spend out to improve the balance sheet."
If private equity comes sniffing again, then that's icing on the cake.
She nominated CSL as a safe bet in the coming period.
"I know it's boring but it's very defensive. It's going to grow double digits for the next three years and [the] share price hasn't really rallied aggressively relative to others."
Ramsay shares have risen 5.6% this year, while CSL is up 5.7%.
Liu's recommendations concurred with the analysts at Firetrail, who released a memo this month explaining their overweight position in healthcare.
The Firetrail team, just like Liu, loves the look of Ramsay and CSL.
"Ramsay will likely deliver above-trend growth in 2023/24 as the surgery backlog is addressed," read the memo.
"CSL is the ultimate defensive… CSL grew earnings per share by 60% during the global financial crisis, compared to a 20% fall in EPS for the S&P/ASX 200 Index (ASX: XJO)."
