Morning Report Thursday 4 September 2014
Our glorious Healthcare sector keeps rallying, should we wait or jump on board?
With the much discussed ~$4bn Medibank float on the horizon and listing due by December, I felt it was time to revisit one of the local markets best performing sectors. The Healthcare sector has benefited immensely from Australia’s future problem of an ageing population and has become a great example of “you get what you pay for”. The very high P/E ratio (price/earnings ratios) for the sector has proven to be a very accurate predictor for future price appreciation.
The average p/e of the below 7 healthcare stocks is 32, compared to 13 for BHP and 15 for CBA.
Below is a snapshot of my thoughts on seven healthcare stocks. The recent retracements in both CSL (12.4%) and Ramsay Healthcare (13.6%) illustrates excellently that identifying great companies is very important, but ignoring good levels to purchase these stocks is often going to lead to poor performance. We have at our fingertips both valuation metrics and technical levels and I believe in using both.
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