Macro and Australian equity strategist, Macro Strategy Advisors

Shane Lee

Macro and Australian equity strategist

Macro Strategy Advisors

Thematic (Sector/Industry)

Australia Health care / Thematic (Sector/Industry)

<ul class=""><li>Australian Growth stocks have under-performed in the past four years, but they generally perform well in a rising global interest rate environment.  We think it’s now worth revisiting some of the healthcare names that have been left behind.</li><li>Buying<a href="https://www.smartkarma.com/entities/917" target="_blank" data-smartkarma-citation="entities:917:1">CSL Ltd (CSL AU)</a>, <a href="https://www.smartkarma.com/entities/918" target="_blank" data-smartkarma-citation="entities:918:1">Cochlear Ltd (COH AU)</a> and <a href="https://www.smartkarma.com/entities/22653" target="_blank" data-smartkarma-citation="entities:22653:1">Resmed Inc Cdi (RMD AU)</a> has proved successful, with these stocks providing the best returns in the sector when global Growth stocks out-perform. <a href="https://www.smartkarma.com/entities/2086" target="_blank" data-smartkarma-citation="entities:2086:1">Regis Healthcare Ltd (REG AU)</a> has also performed well in these periods, but it trades on a much lower PE multiple. </li><li>SIG, <a href="https://www.smartkarma.com/entities/757" target="_blank" data-smartkarma-citation="entities:757:1">Mayne Pharma Group Ltd (MYX AU)</a>, <a href="https://www.smartkarma.com/entities/673" target="_blank" data-smartkarma-citation="entities:673:1">Ramsay Health Care Ltd (RHC AU)</a>, <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1">Australian Pharma Indus Ltd (API AU)</a> and <a href="https://www.smartkarma.com/entities/15254" target="_blank" data-smartkarma-citation="entities:15254:1">Vtx Holdings Ltd (VTX AU)</a> have also performed generally well when global Growth has out-performed, but they were left behind during the most recent period (November 2016 – May 2017). <a href="https://www.smartkarma.com/entities/673" target="_blank" data-smartkarma-citation="entities:673:1">Ramsay Health Care Ltd (RHC AU)</a> looks the most appealing out of these laggards, with strong analyst conviction for FY17 earnings and solid earnings growth expectations for the next two years.  There is possibly upside risk to acquisition synergies.  The main down-side risk is that private health insurance growth slows further.</li><li><a href="https://www.smartkarma.com/entities/14466" target="_blank" data-smartkarma-citation="entities:14466:1">Sonic Healthcare Ltd (SHL AU)</a>, <a href="https://www.smartkarma.com/entities/24208" target="_blank" data-smartkarma-citation="entities:24208:1">Fisher &amp; Paykel Healthcare Corporation Limited (FPH AU)</a>, <a href="https://www.smartkarma.com/entities/14760" target="_blank" data-smartkarma-citation="entities:14760:1">Japara Healthcare Ltd (JHC AU)</a> and <a href="https://www.smartkarma.com/entities/77" target="_blank" data-smartkarma-citation="entities:77:1">Estia Health Ltd (EHE AU)</a> performed well during the most recent period of global Growth out-performance.  </li><li><a href="https://www.smartkarma.com/entities/24208" target="_blank" data-smartkarma-citation="entities:24208:1">Fisher &amp; Paykel Healthcare Corporation Limited (FPH AU)</a> has repeatedly delivered a strong RoE and it has a strong earnings outlook, but with these positives is a lofty PE multiple. Legal risk seems contained, but new tariff's from a renegotiated NAFTA could be problematic.  However, the stock has given investors the sector's best risk-adjusted return since 2012, closely followed by <a href="https://www.smartkarma.com/entities/673" target="_blank" data-smartkarma-citation="entities:673:1">Ramsay Health Care Ltd (RHC AU)</a>.</li></ul>

Australian Growth stocks have under-performed in the past four years, but they generally perform well in a rising global interest rate environment.  We think it’s now worth revisiting some of the healthcare names that have been left behind.BuyingCSL Ltd (CSL AU), Cochlear Ltd (COH AU) and Resmed Inc Cdi (RMD AU) has proved successful, with these stocks providing the best returns in the sector when global Growth stocks out-perform. Regis Healthcare Ltd (REG AU) has also performed well in these periods, but it trades on a much lower PE multiple. SIG, Mayne Pharma Group Ltd (MYX AU), Ramsay Health Care Ltd (RHC AU), Australian Pharma Indus Ltd (API AU) and Vtx Holdings Ltd (VTX AU) have also performed generally well when global Growth has out-performed, but they were left behind during the most recent period (November 2016 – May 2017). Ramsay Health Care Ltd (RHC AU) looks the most appealing out of these laggards, with strong analyst conviction for FY17 earnings and solid earnings growth expectations for the next two years.  There is possibly upside risk to acquisition synergies.  The main down-side risk is that private health insurance growth slows further.Sonic Healthcare Ltd (SHL AU), Fisher &amp; Paykel Healthcare Corporation Limited (FPH AU), Japara Healthcare Ltd (JHC AU) and Estia Health Ltd (EHE AU) performed well during the most recent period of global Growth out-performance.  Fisher &amp; Paykel Healthcare Corporation Limited (FPH AU) has repeatedly delivered a strong RoE and it has a strong earnings outlook, but with these positives is a lofty PE multiple. Legal risk seems contained, but new tariff's from a renegotiated NAFTA could be problematic.  However, the stock has given investors the sector's best risk-adjusted return since 2012, closely followed by Ramsay Health Care Ltd (RHC AU).

Australian Pharmaceutical Industries (API AU)

Time to Look at the Laggards in Aussie Healthcare