I would describe ASX healthcare shares as a somewhat ‘under-the-radar’ sector of the share market. Sure, market-darling CSL Limited (ASX: CSL) has managed to sneak up to be one of the most popular ASX shares to hold in a modern portfolio.
But out of the ASX 50 (that’s the largest 50 Aussie public companies) – only 4 are classified as belonging to the healthcare industry.
They are CSL, Ramsay Health Care Limited (ASX: RHC), Sonic Healthcare Limited (ASX: SHL) and Cochlear Limited (ASX: COH).
If you were splitting hairs, you could also throw in Medibank Private Ltd (ASX: MPL), although it’s technically a Financial.
But I think healthcare is one of the best places to be investing as we begin the new decade. In my view, the under-representation of healthcare in the ASX 50 just means there’s plenty of room for growth!
Well, I have 2 rock-solid (in my opinion, anyway) reasons.
1. Ageing demographics
It’s no secret that our population is ageing. According to reporting in the Sydney Morning Herald, it’s estimated that by the year 2056, there is expected to be just 2 workers for every 1 retiree – down from today’s ratio of 4-to-1.
That’s a scary statistic, but it’s also one that I think indicates a lot of potential in the healthcare sector for investing today.
2. Government support
As our population ages, there is going to inevitably be more pressure on government services to provide the same level of care from fewer taxes being proportionally paid by less workers. As a result, I expect governments to increasingly rely on the private sector to fill this gap.
This might come through the use of higher tax incentives like the private health insurance rebate and Medicare levy, or grants to private health providers to shoulder some of this burden.
Whichever way the cookie crumbles, I think this sector will stand to benefit as we stare down this barrel.
Yes, I think the government will be buying more vaccines from CSL as time goes on.
Yes, I think Ramsay Health Care (and its extensive network of private hospitals) will benefit in more than one way from government policy in the future.
And yes, I think Medibank and other private insurers will continue to be encouraged by the state to take some of the pressure off Medicare.
All in all, healthcare is a sector that I believe is a no-brainer to be investing in this decade and beyond, for the reasons outlined above. By looking at the demographic trends that are hitting our population, it’s really not too hard to imagine the benefits that are going to flow into the healthcare sector as a whole. It’s a pie I certainly want a slice of!
The post Why ASX healthcare shares are a no-brainer for the 2020s appeared first on Motley Fool Australia.
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Sebastian Bowen 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. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd., Ramsay Health Care Limited, and Sonic Healthcare 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. 2020