Insights

3 top ASX shares in sector selling at 30% discount: expert

The stock market is reaching new heights but there’s still one industry unloved by investors. Here’s how to take advantage.
The post 3 top ASX shares in sector selling at 30% discount: expert appeared first on The Motley Fool Australia. –

The Australian share market has reached all-time highs, but according to one expert, there is still one sector that’s selling at a 30% discount.

There is constant commentary about the ageing population and the need for investment catering to older Australians.

So Citi senior investment specialist Mahjabeen Zaman is puzzled by how health shares have struggled recently.

“Australian healthcare stocks, which include some leading global companies, have underperformed our primary share market index, the S&P/ASX 200 Index (ASX: XJO), by 30% over the past 12 months,” he said on a Citi blog post.

“It is not a phenomenon restricted to Australia. In the United States, Bloomberg data shows the price of healthcare stocks, based on forward earnings estimates, trade at a 30% discount to the S&P 500 Index (SP: .INX).”

Zaman added that this situation provides investors with a golden opportunity to buy in for cheap.

“Healthcare will be a global focus for a long time to come… Life expectancy globally increased from 52 years in 1960 to nearly 73 years in 2019,” he said.

“Citi views increasing longevity as one of our unstoppable trends, which are long-term forces that revolutionise the way we live and do business globally.”

Zaman’s team reckons growth in healthcare revenues and profits will outpace other sectors just because of the ageing global demographics.

“Also, the potential ‘value’ of healthcare shares stands out, as most other sectors are trading at high valuations,” he said.

“Historically, healthcare has shown resilience on the downside when broader markets correct.”

3 leading ASX healthcare shares

Zaman especially likes 3 ASX stocks in particular — CSL Limited (ASX: CSL), Resmed CDI (ASX: RMD) and Sonic Healthcare Limited (ASX: SHL).

“A shared trait is they derive the majority of revenue from US sales, placing the companies in a prime position to do well as the US recovers from the pandemic.”

Resmed’s ungeared balance sheet and strong cash flow is attractive to Citi.

“We expect continued share buybacks likely in the absence of meaningful acquisition opportunities.”

The prospect of plasma donors in American returning in the post-COVID era gives CSL tremendous comeback potential.

“Plasma fractionation accounts for about 85% of CSL’s earnings,” said Zaman.

“We expect that as the year progresses plasma donors will return in the US, and that plasma collections will increase towards normal, leading to earnings upgrades next year.”

Sonic Healthcare is the third largest pathology services provider in the world, according to Zaman.

“Sonic owns the biggest privately held pathology lab in the US, Clinical Pathology Laboratories, as well as one of Europe’s largest, Bioscientia Healthcare,” he said.

“Management has made it clear the company’s balance sheet is under geared, and have a pipeline of merger and acquisition opportunities. It is actively bidding on a number of opportunities [for] mergers and acquisitions, contracts and joint ventures in Australia, UK, USA and Canada.”

Sonic’s shares were up 1% on Tuesday morning, trading at $37.92. They’re up 15% this year.

CSL stocks plunged 1.64% in early trade on Tuesday, to go for $299.98. That’s 5% up year-to-date.

Shares for Resmed rose 1.27% on Tuesday morning, selling for $31.86. They’ve ascended 16% this year so far. 

The post 3 top ASX shares in sector selling at 30% discount: expert appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

Iluka (ASX:ILU) share price jumps even as it pours water on M&A rumours
5 things to watch on the ASX 200 on Tuesday

ASX 200 drops, CBA sinks, Boral sells US division

Why Seven (ASX:SVW) has slammed the Boral deal today
2 blue chip ASX shares rated as buys

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has recommended ResMed Inc. and Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!