For more than a year now, experts have been saying ASX healthcare shares are the place to park your money.
The reasoning is that health is a type of spending that consumers are reluctant to cut back even in times of economic stress.
But like many things on the stock market, this thesis hasn't gone according to script.
The cold could rejuvenate the health sector
Last month was especially brutal.
"Investors looking for comfort in healthcare so far this winter have yet to find it, with the sector falling 6.6% in June, its worst month since January 2022," said eToro market analyst Josh Gilbert.
"CSL Limited (ASX: CSL) was a big contributor to the losses, falling by 10% after it announced a profit warning for its upcoming full-year results."
Indeed the biotechnology giant could be a microcosm of the broader industry, with the share price just going sideways ever since COVID-19 hit three years ago.
To this day, the CSL share price has not yet reached its pre-pandemic high in the $330s. It now languishes in the $270s after a shocking June.
Gilbert, however, has some great news for those willing to buy the dip.
"There may be some opportunity for contrarian investors, with the ASX healthcare sector climbing by an average of 9.5% in the previous five years over Australia's winter period, offering portfolios protection from the cold."
So if you're now willing to give healthcare a bash, the analysts at LSN Capital Partners have a suggestion.
The hot small-cap tip in the health industry
Similar to CSL, Capitol Health Ltd (ASX: CAJ) shares tumbled 5% in June.
LSN analysts, in a memo to clients, blamed this on an update from the imaging provider that fell "below expectations" because of "increased labour costs, disrupted GP network and underutilisation of radiologists".
But with the shares now trading more than 15.6% lower than where they started 2023, it's a long-term buy for the team.
"Looking ahead into FY24 and beyond, the company is expected [to] deliver strong growth as a normalised operating environment returns, evidenced in late 4Q, and we don't believe the current valuation reflects these growth prospects."
The other potential windfall is the current corporate tension within the health industry.
"Their assets are highly strategic in an industry which attracts regular corporate activity where larger transactions (>$200 million enterprise value) have been completed at >11x EV/EBITDA, versus Capitol Health currently trading on 7x EBITDA (FY24)."
A nice bonus for Capitol Health investors is that it pays out a 3.7% dividend yield, which is fully franked to boot.
Encouragingly, five out of seven analysts currently surveyed on CMC Markets rate Capitol Health as a buy.
