A very logical question with a recession in 2023 feeling like a 50-50 punt, we are leaning towards any economic contraction being shallow although unfortunately this is one play which is largely in the central banks court. Generally healthcare stocks outperform during a recession because our health is one of the last things people cut back on however not all companies are equal and businesses with more debt / less cash flow are far more likely to struggle i.e. biotech start ups are probably best avoided.
Some of MM’s favourites have solid balance sheets and clear product advantages e.g. CSL Ltd (CSL), ResMed (RMD), Cochlear (COH) and Ansell (ANN) i.e. fairly mainstream and boring. Also we would add Ramsay Healthcare (RHC) to the mix which is trading well below KKR’s $88 bid price lobbed in just a few months ago which implies to us there’s plenty of value / defensive qualities in RHC around todays $70. In the US, this week we bought HCA Healthcare (HCA US) and at the smaller end of town we like Capitol Health (CAJ), which is a diagnostics/imaging business. At current prices and following the recent rally from both CSL & RMD which we own, our preference would be RHC at current prices.