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  5. AND: I’ve always had less than positive results investing in the healthcare sector. [Andlauer Healthcare Group Inc. Subordinate Voting Shares]
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Q: I’ve always had less than positive results investing in the healthcare sector. Finally I decided to go with an ETF (XHC) to do away with the individual stock picking risk which has since declined as well. I am now thinking of sticking with “healthcare adjacent” companies since SIS (currently owned) has done well for me. Can you please comment on SIA, CSH, and AND, the first two have run up a bit recently and I wonder about their valuations and future prospects. Any other candidates that might fit the bill you could recommend, I know choices in Canada are slim?
Asked by Stephen R. on November 21, 2024
5i Research Answer:

The sector has been hit hard with concerns over Trump policies. We would be comfortable with any of the companies noted, also WELL and VHI for sector exposure. SIA and CSH are similar in that they serve the old age home market. After its run up SIA is 32X earnings with a 5.5% yield. That valuation is on the high side of history, but in an environment of lower rates it can do well. It is fairly leveraged and we would not expect huge growth here and would look to it primarily for income. CSH is also in the similar valuation range, with a 3.8% dividend. It is expected to show better growth over the next two years and it has cleaned up its portfolio nicely over the past few years. AND serves the healthcare supply chain, and is currently 26X earnings with a 1% yield (the dividend was raised 10% in September). The balance sheet is very strong (much better than the others) and much better earnings growth is expected (15%+). The stock has not done much but we would consider it a solid company overall. 

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