Due to new technologies and favourable industry tailwinds, I think there are a number of small cap ASX healthcare shares which have the potential to grow materially over the next 10 years.

Three small cap healthcare shares to add to your watchlist right now are listed below. Here’s why I think they are worth watching:

Alcidion Group Ltd (ASX: ALC)

The first small cap ASX healthcare share to watch is Alcidion. It is a health informatics company aiming to transform healthcare with smart, intuitive technology solutions. The company has a growing portfolio of software products and services that support interoperability, allow communication and task management, and deliver clinical decision support at the point of care to improve patient outcomes. At present its software is in 215 hospitals, 42 healthcare organisations, and on 30,000 beds. I expect this to increase strongly in the coming years and drive strong sales growth.

Medadvisor Ltd (ASX: MDR)

Another ASX healthcare share to watch is Medadvisor. It is a growing software systems developer with a focus on addressing gaps in personal medication adherence. The company provides software that connects to pharmacy dispensing systems to automatically retrieve medication records. It also comes with an intelligent training, information, and reminder system to ensure correct and reliable medication use. In addition to this, the company is rolling out a medicine delivery service and a telehealth solution. The latter looks set to benefit from the rapid adoption of telehealth technology following the pandemic.

Volpara Health Technologies Ltd (ASX: VHT)

Another small cap ASX healthcare share which I believe has significant potential is Volpara. Its software leverages artificial intelligence imaging algorithms to assist with the early detection of breast cancer. It has been growing its market share in North America at an exceptionally strong rate. This led to the company recently reporting a 172% increase in annual recurring revenue (ARR) to NZ$18 million. The good news is that this is still only scratching at the surface of an estimated US$750 million ARR opportunity in breast cancer screening.

More reading

• Top brokers name 3 ASX shares to buy next week
• 3 exciting small cap ASX shares that should be on your watchlist
• These small cap ASX shares could be stars of the future
• 3 exciting ASX healthcare shares to watch in the 2020s
• 3 exciting small cap ASX shares to invest $3,000 into right now

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd and MedAdvisor. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia has recommended Alcidion Group Ltd and MedAdvisor. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The CSL Limited (ASX: CSL) share price has done the unthinkable and actually underperformed the broader S&P/ASX 200 Index (ASX: XJO) over the past month.

To be frank, CSL shares normally beat the pants off the market. It managed to do this both in the 2016–2020 bull market and in the short-but-sharp bear market we saw in February and March of this year.

But since mid-April, CSL shares have actually fallen around 10%, whilst the ASX 200 has rallied around 7% over the same period.

What’s going on?

Has CSL lost its magic?

Well, in my opinion, the recent underperformance of CSL shares has nothing to do with the company itself. CSL hasn’t yet told the markets if it expects any material hit to revenue or earnings as a result of the coronavirus pandemic (apart from disruption to plasma collections). CSL isn’t actively joining the race for a COVID-19 vaccine, but (as Fool contributor Nikhil Gangaram pointed out today) the company is working on antibody-based medicines that will allow patients to recover faster without the use of a ventilator.

We do know that CSL has obtained additional capital (US$750 million at 2.68%) through the bond market recently, but again, this doesn’t indicate anything of significance for investors in my view.

So no, I don’t think CSL has lost its magic.

Instead, I view the pullback in the CSL share price as a sign that investors might have got a little ahead of themselves in April.

CSL shares reached lows of $270.88 in March, but by 9 April, CSL was back to $329 a share, just below the all-time high of $342.75 that we saw in February.

Given what’s going on in the global economy, it’s possible investors decided this run-up was a little optimistic, and that’s why we are seeing a more subdued CSL share price in recent weeks.

Are CSL shares a buy today?

Although I’ve long thought CSL is a top company, it’s also a little too highly priced for me to consider a buy today. Even on today’s share price of $298.27, the company is still asking a price-to-earnings (P/E) ratio of 44.28. That’s a fairly high number for the ASX’s largest company, and one I don’t think is entirely justified by CSL’s future growth prospects.

I might be waiting a while, but CSL is still not in the buy zone for me, despite its resilience and quality as a business.

More reading

• These are the latest ASX shares to be upgraded by brokers to buy
• 3 strong ASX 200 shares to buy for a retirement portfolio
• Top brokers name the latest ASX 200 stocks to sell today
• These ASX 200 share prices were cut in half. Where are they now?
• 2 ASX shares in the fight against coronavirus

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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There are some cheap ASX shares out there that are trading at great value in my opinion, partly due to the coronavirus.  

With some shares it’s hard to decide if they’re trading cheaply or not because it’s hard to gauge how to price the current and future earnings. It’s much easier to see when a quality business is trading cheaply compared to their assets.

Here are two cheap ASX shares to buy today:

Brickworks Limited (ASX: BKW)

Brickworks is one of Australia’s biggest building materials businesses. It produces a variety of products including bricks, paving, roofing, precast and so on. Everyone is expecting there to be a construction slowdown later this year because of the coronavirus economic impacts. The same can be said for Brickworks’ US operations.

But when you factor in the value of Brickworks’ other assets, it makes the construction side look extremely cheap. Brickworks currently owns a large chunk of Washington H. Soul Pattinson and Co Ltd (ASX: SOL), these shares are currently valued at approximately $1.75 billion. It also has a 50% stake of an industrial property trust which is worth $710 million. The value of these two divisions together comes to around $2.45 billion, which compares to Brickworks’ current market cap of $2.05 billion.

Wouldn’t you want to buy a great building products company operating in two major markets for less than $0? That’s why I think Brickworks is a cheap ASX share.

Future Generation Global Invstmnt Co Ltd (ASX: FGG)

This is a special listed investment company (LIC). It donates 1% of its net assets each year to youth mental health charities. The LIC doesn’t change any management fees or performance fees. Future Generation Global invests in the funds of Australian fund managers that invest in overseas shares.

These fund managers are meant to be among the best in Australia. They include names like Magellan Financial Group Ltd (ASX: MFG) and Cooper Investors.

The global LIC has been a solid performer over the past three years to 30 April 2020. Its gross investment performance of 10.6% per annum outperformed the MSCI AC World Index (AUD) by 1.3% per annum. Outperformance makes a cheap ASX share even more attractive. 

I think Future Generation Global is a cheap ASX share because at the end of April 2020 its pre-tax net tangible assets (NTA) per share was $1.426 per share, which is a 20% discount to today’s share price of $1.145. You wouldn’t be able to get that kind of discount by investing with the fund managers yourself.

Foolish takeaway

I think both of these ASX shares look cheap to me. Once construction starts again I think the current Brickworks share price will look very cheap. Brickworks also comes with a grossed-up dividend yield of 6%. However, Future Generation Global does offer much more diversification with international exposure. I think both shares are great, cheap buys today.

More reading

• 2 quality ASX shares to buy for long-term growth
• How I would build a $130,000 ASX dividend portfolio right now
• How $1,000 can be enough to change your money mindset
• 3 ASX shares that I’d invest $1,000 into EVERY month
• My 3 best ASX dividend shares to buy right now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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I’ve been keeping a close eye on what substantial shareholders have been doing recently.

Substantial shareholders are shareholders that hold 5% or more of a company’s shares. These tend to be large investors, asset managers, and investment funds. These shareholders are obliged to update the market when they make any changes to their holdings.

As a result, I feel investors should look to use these notices to their advantage. After all, they show where the smart money is going.

Two notices that have caught my eye are summarised below:

Mayne Pharma Group Ltd (ASX: MYX)

According to a notice of initial substantial holder, Lazard Asset Management Pacific Co. has been buying this pharmaceutical company’s shares over the last three months. It picked up its first parcel of shares at the end of February and made its most recent purchase on Thursday with a ~$890,000 investment. This final purchase took its holding to a total of 84,379,755 shares, which represents a 5.03% stake in the company.

Mayne Pharma’s shares have fallen heavily over the last few years due to incredibly tough trading conditions in the generic drugs market. Lazard may believe the company is over the worst of it now and could return to growth in the near future.

Megaport Ltd (ASX: MP1)

Another notice of initial substantial holder reveals that Commonwealth Bank of Australia (ASX: CBA) has become a substantial holder of this elasticity connectivity and network services provider. The banking giant and its subsidiaries have been building a position over the last few months and now own a total of 7,811,384 shares. This equates to a 5.1% stake in the company.

Megaport’s shares have been on fire over the last 12 months thanks to its explosive recurring revenue growth. This has led to them generating a return of over 130% for shareholders. Judging by its purchases, Commonwealth Bank appears to believe there are more strong returns to come in the future.  

More reading

• ASX 200 Weekly Wrap: ASX rallies on mining highs
• 3 high yield ASX dividend shares to buy right now
• How $1,000 can be enough to change your money mindset
• Is Afterpay an ASX blue chip of tomorrow?
• 2 ASX 200 dividend shares to buy for income in 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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