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5 big investment ideas for your SMSF in the year ahead

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By Peter Switzer and Paul Rickard, founders of the Switzer Super Report

With the new financial year in full swing, now is a good time to look at the trends that will be driving the markets over the next 12 months.

Despite the uncertainty that plagued the second half of last financial year, most major markets performed well in FY2013-14.

The total return on Australian shares as measured by the S&P/ASX 200 Accumulation Index was over 17.4%. These are the best back-to-back returns for investors in seven years. Other markets have performed well too, with residential dwellings up by around 10.3%, according to RP Data, and bond markets returning just over 4%.

At the Switzer Super Report, we now expect interest rates in Australia to be on hold for some time and believe that the sharemarket will end 2014 higher, moving towards 6000. The first half of calendar 2015 may be a little more challenging for markets – so much depends on the Central Banks and whether they continue with their policy to provide very accommodative monetary policy.

The year ahead may be slightly more volatile, but any savvy investor knows that good companies will outperform no matter what. In our latest eBook, we’ve identified five long-term investment trends that we think you should get on board in over the next 12 months and beyond. Below is the first of the five trends - to read the final four you can download the complete eBook for free here.

1)    Health care

Australia, like many countries around the world, is grappling with a rapidly ageing demographic.

The proportion of the population aged 65 years or more is forecast to increase

from around one in seven Australians in 2012 to one in four Australians by 2060. It will then rise to close to 1 in 3.5 at the turn of the next century, according to a recent Productivity Commission report into an Ageing Australia.

More people living longer, means there will be a higher demand on health care services. And the way all Australians, including older Australians, use health care is changing. We all now demand a better standard of care.

Research by IBISWorld shows that people aged 65 and over account for over 35% of medicare-subsidised diagnostic imaging revenue, although they only account for 14.2% of the population. So they are also using preventative health care services as well as reactive treatment services.

Australian companies in this space hold their own on the world stage. Most of the companies in this sector are in fact competing in global markets. They also tend to have a high share of earnings in US dollars and sector PE for health also tends to be high, partly due to the macro growth factors.

While most investors will be familiar with Cochlear, there are quite a few companies in this space that are worth considering.

Company

Type of business

Cochlear (COH)

Bionic ears

CSL Ltd (CSL)

Blood products

Primary Health Care (PRY)

GP Clinics

Ramsay Health Care (RHC)

Hospitals

Resmed (RMD)

Sleep Disorder

Sirtex Medical (SRX)

Cancer treatment

Sonic Healthcare (SHL)

Pathology & radiology

Virtus Health (VRT)

IVF

Private hospital operator Ramsay has dominated its market and is also expanding offshore. It has major operations in the UK, France and since July last year, Malaysia.

Its first half numbers were very positive and Chief Executive Officer Chris Rex is on the record as saying they will continue to look at opportunities in offshore markets. Its share price growth over the past 10 years is also commendable (see graph).

Ramsay Healthcare (RHC)

Source: Yahoo

CSL has also done well over the past decade and more recently, sales from its speciality products for wound healing and peri-operative bleeding experienced a 16% increase in the half-year to December. It has recognised increasing competition for its traditional plasma products and is focussing on expanding its product range to diversify away from this risk where possible.

Other smaller players in the sector like IVF provider Virtus and cancer treatment company Sirtex are also doing well. Virtus has understood there is a growing demand for pregnancy services, and demography plays a role here as well. Women are waiting longer to have children, which increases the chances they will need medical assistance to get pregnant in the first place. And if trials for Sirtex’s cancer treatment continue to go well, the company’s, growth potential is big.

This article is an excerpt from the eBook Five Big Investment Trends for your SMSF in the Year Ahead. Click here to download the complete eBook for free.

Published on: Thursday, September 18, 2014

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer, Roger Montgomery, Paul Rickard and Charlie Aitken the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

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