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Should you buy CSL and these ASX healthcare shares?

James Mickleboro

I think that one of the best places to look for long-term investments is the healthcare sector. This is because I expect a number of positive tailwinds will lead to demand for healthcare services and products growing strongly over the next couple of decades.

Three healthcare shares that I think have the potential to provide market-beating returns over the next few years at least are listed below. This could potentially make them great options today. Here’s why:

Cochlear Limited (ASX: COH)

Cochlear is a leading developer, manufacturer, and distributor of cochlear implantable devices for the hearing impaired. Last week it continued its strong form and posted a fully year net profit after tax of $276.7 million, which was a 13% (11% in constant currency) increase on FY 2018’s result. I believe there will be more of the same from Cochlear over the next decade thanks to the ageing population tailwind. According to the WHO, it estimates that there will be 1.5 billion people over the age of 65 by 2050, which is almost triple the number in 2010. I expect this to lead to growing demand and underpin strong earnings growth for a long time to come.

CSL Limited (ASX: CSL)

CSL continues to be my favourite healthcare share. I think the biotherapeutics giant is one of the best buy and hold options on the local market due to the quality and strength of its CSL Behring and Seqirus businesses. CSL Behring is the global leader in plasma therapies and Seqirus is the second biggest influenza vaccines company globally. In FY 2019 the two businesses continued to shine. CSL Behring reported an 11% jump in total revenue to US$7,343 million and the Seqirus business posted a 12% increase in total revenue to US$1,196 million. Due to increasing demand, the quality of its products, and development pipeline, I expect more of the same in FY 2020 and beyond.

Nanosonics Ltd (ASX: NAN)

One of my favourite long-term options in the healthcare sector is Nanosonics. It is a leading infection control specialist which has carved out a leadership position in ultrasound probe disinfection. This has led to the company’s popular trophon EPR system growing its footprint materially over the last few years. Pleasingly, there is still a significant runway for growth for this product which I expect to drive solid sales and earnings growth over the coming years. Especially given the recurring revenues that the product generates from the consumables it requires. In addition to this, the company is planning to release more products in the coming years targeting unmet needs. If these are a success then Nanosonics’ growth could move up another gear. Though, it is worth noting that its full year results are due to be released today. So investors might want to wait to see what the market makes of that before considering an investment.

And here is a small cap healthcare share which could be destined for very big things over the coming years. This could make it a great time to pick up shares.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., and Nanosonics Limited. The Motley Fool Australia has recommended Cochlear Ltd. and Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019