Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 21 July 2015

Healthy stock returns

Health care sector expansion

When I was busily penning my first book Get a Financial Grip back in 2011, one of the key themes I identified was the health care sector as a likely strong outperformer over the decades ahead. 

The underlying reasoning was simple enough: Australia has both a strongly expanding population and an ageing one.

In this context, the most recent Quarterly Detailed Labour Force figures revealed that health care has become the fastest growing employment sector in the country.

Moreover, this is part of a long term structural change.

Over the past year some 33,000 jobs have been shed from the mining sector, and it is sure to be a tough time ahead for many resources regions.

Manufacturing employment has also continued to shrink, albeit at not quite such a dramatic pace, while agriculture and fishing shed some 28,000 positions over the year to May 2015.

Despite the drag from these sectors the Australian economy has added more than 255,000 jobs over the past year according to the ABS "original" data series, very much driven by strong growth in services employment.

Healthcare and social assistance added a whopping 98,000 new jobs in the year to May 2015, and this is a sector which is expected to thrive over the decades ahead as the Australian population both expands and ages.

Returns and picking winners?

In terms of how investors might have aimed to profit from this and which stocks to pick, the safest approach has simply been to aim to own all of them worth owning.

The S&P/ASX 200 Health Care provides investors with a sector benchmark that reflects those companies included in the S&P/ASX 200 that are classified as members of the GICS health care sector and sub-industries.

The results haven't been too shabby either, with 5 year annualised returns tracking at 18.72 per cent.