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Time to Look at the Laggards in Aussie Healthcare
- 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.
- Buying CSL, COH and RMD has proved successful, with these stocks providing the best returns in the sector when global Growth stocks out-perform. REG has also performed well in these periods, but it trades on a much lower PE multiple.
- SIG, MYX, RHC, API and VTX 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). RHC 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.
- FPH 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 tariffs 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 RHC.
Provider
Macro Strategy Advisors Pty Ltd
About us:
- The business is a Proprietary Limited Australian company that is owned and fully operated by Shane Lee from a small office in Sydney’s CBD.
- Shane worked for 17 years in Sydney-based senior research roles (economist, equity strategist and bond strategist) in global and regional investment banks and a domestic commercial bank prior to starting Macro Strategy Advisors. These roles straddled the asset classes making him uniquely positioned to advise multi-asset investors. He worked for the Reserve Bank of Australia (RBA) for 3 years as a housing, commercial property and equity market analyst and a liquidity forecasting specialist. He worked as a structural engineer in Queensland for 10 years prior to his career at the RBA.
Aim of our business:
- To partner with our clients in their aim to maximise returns. We provide timely, independent and thought-provoking research on thematic macro issues that are impacting or could impact financial markets. We aim to produce research that prompts our clients to question their assumptions.
Services:
- A fortnightly research note.
- Regular presentations and data support delivered by understanding our clients interests and investment process.
- We also in work in confidence to investigate, analyse and report on issues at our clients direction. This work is done on a project-by-project basis.
- As an Australian based business, the main focus is analysing how domestic and global issues impact Australian investors. However, our global and domestic insights are also valued by our offshore clients.
Our Edge:
- Our low cost base relative to our competitors allows us to provide a quality product at a reasonable cost.
- We are fully independent and don’t support a banking function or any third party. We have no interests other than providing our clients with the best possible research.
- Our focus is not point forecasting, but providing rigorous analysis and insight. We don’t routinely focus on the top or bottom 10% of likely outcomes to create a headline.
- Shane’s background in engineering has provided clients with unique insights into global infrastructure and domestic housing issues.
Shane Lee
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