3 ASX shares to combat the next market dip: experts

Two mature women learn karate for self defence.Two mature women learn karate for self defence.

Share markets around the world have enjoyed a nice renaissance in recent weeks.

The S&P/ASX 200 Index (ASX: XJO), for example, has risen 6.5% over the past month.

But with rising interest rates and with winter recessions looming over both Europe and US, no investor can ignore the possibility that stocks will dive yet again.

With this anxiety, it could be worth considering buying ASX shares that have some resilience and defensive qualities.

But for long-term investors, there still needs to be some prospects for growth too.

Switzer Financial Group director Paul Rickard recently suggested the healthcare sector fits that bill.

Globally, health shares are traditionally considered defensive because they enjoy strong demand even through suboptimal economic conditions.

But ASX-listed healthcare businesses have a nice twist, according to Rickard.

“Australia’s a little bit different because we have companies that are really focused on a global marketplace — most of their revenues actually come from outside Australia,” he told Switzer TV Investing.

“So the companies that represent the major part of our healthcare sector tend to command pretty high price-earnings multiples.”

Agreeing with this sentiment, a pair of other experts named three ASX shares in the health sector that are ripe to buy right now:

Attractive share price, strong books

For Blackmore Capital chief investment officer Marcus Bogdan, Healius Ltd (ASX: HLS) is a buy after a 36% fall in the share price this year.

“The stock has de-rated. It was the darling through COVID-19 because of pathology and PCR testing but the base business suffered considerably,” he said in a Livewire video.

“Now, as PCR testing is coming down, we do see the base business improving over time.”

Healius, which runs pathology labs, imaging centres and day hospitals, is financially sound enough to power through an economic slowdown.

“It has a strong balance sheet which leads to capital returns, its price-to-book ratio is very attractive, and the PE on a normalised run rate is also attractive. So it’s a buy.”

Defence and offence all in one stock

Firetrail portfolio manager Blake Henricks likes the look of biotechnology giant CSL Limited (ASX: CSL).

“It’s large, it’s liquid, it’s healthcare. So to me, it ticks all the defensive boxes.”

While CSL made many investors wealthy over its three-decade listed life, the past couple of years has been flat.

In fact, the share price has yet to reach pre-COVID highs, rising just 1.3% over the past two years.

Henricks likes how one of its expenses reduces as the economy grinds to a halt.

“That’s the plasma collection. This is where they pay donors to give blood and they turn that into plasma,” he said.

“The higher unemployment goes, the more people want to give plasma and the costs come down. And so on that basis, it’s really attractive as a defensive.”

CSL shares might look expensive, Henricks admitted, but the valuation based on future growth looks attractive.

“2023 is already written [in]. 2024, the earnings are looking very strong in our view, and you’re seeing it in a mid to high-20s PE,” he said.

“They expense all their R&D. It’s a very well-run business.”

Ready to make amends

Ramsay Health Care Limited (ASX: RHC) shares have caused nothing but heartache for investors in recent years.

The stock price has lost 8% over the past five years, and it’s crashed around 23% since 22 April after a takeover proposal was killed off. 

But Bogdan feels like it’s due for a turnaround.

“I do think the private hospital business has really three things going for it.”

First tailwind is that there is a massive backlog of elective surgeries to work through now that pandemic restrictions are behind it.

“Secondly, the rise of chronic disease continues,” he said.

“And thirdly, it’s demographics. As we age, we need more healthcare.” 

The company also has attractive tangible assets that it could exploit in the coming years.

“They’ve got a very strong property book, which I think, at some stage, they will try to monetise. So based on that, it’s a buy.”

The post 3 ASX shares to combat the next market dip: experts appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has positions in CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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