Expert insights: Top 3 ASX shares with turnaround potential to watch in 2024
The festive season often brings a unique challenge to the world of investing, especially when it comes to finding the right themes in the share market.
As we step into the new year, our focus extends to the healthcare sector within the ASX. It is a sector that not only epitomises the essence of aiding people but also showcases significant potential for a turnaround in 2024.
This sector has weathered tough times but now stands poised for a strong rebound. With insights from Stuart Bromley, a Portfolio Manager at Medallion Australian Equities Growth Fund, we explore 3 ASX healthcare shares that are well-positioned for growth as we head into 2024.
Why healthcare shares?
When we think of the festive season, it's all about giving, joy, and sometimes, a bit of a gamble, especially in the stock market. This year, we're shining the spotlight on a sector that truly embodies the spirit of giving - healthcare.
But it's not just about the feel-good factor of investing in companies that help people. There's a real, tangible opportunity here.
The healthcare sector, especially within the ASX, has recently been hit hard. But here's the thing about hard hits: they often set the stage for impressive comebacks.
Over the last week, there has been a 1.4% rise. In fact, over the past 3 months, the sector has grown by 11.0%. Despite a relatively flat performance over the past year (1.8% growth), the sector is anticipated to see an earnings growth of 18% per annum in the coming years.
This data highlights the sector's resilience and potential for recovery, fitting well with the theme of turnaround potential in healthcare shares for investors considering their 2024 investments.
A space with turnaround potential
Stuart Bromley has been keeping a keen eye on this space. He reckons that while festive themes and sharesPolynovo (ASX:PNV) - pioneering wound care technology
Polynovo, renowned for its innovative biodegradable polymer technology in wound care, has been navigating through a transformative phase.
- Current trading and performance. Polynovo has shown significant recovery, trading at $1.60, up from a 52-week low of $1.10 in October 2023.
- Annual growth outlook. Analysts project a break-even for Polynovo in 2024, with an impressive anticipated annual growth rate of 54%.
- Expert's perspective. Bromley highlights Polynovo's expansion and its cost-effective technology. He notes the company's record sales ($8.8 million delivered in November) and its growing global presence in over 700 hospitals.
"While the share price has bounced off lows in recent times, we see potential for significant upside from here if they can continue to rapidly take market share," he added.
CSL Limited (ASX:CSL) - A resilient biotech player
CSL's performance in the biotech sector has been notably robust. As one of the leading companies in the industry, CSL has maintained a strong market position.
- Current trading and performance. CSL Limited (CSL), trading above $282 (+ 51.29% over the past 5 years) has demonstrated resilience and consistent performance, navigating market challenges effectively, particularly during and after the COVID-19 pandemic.
- Annual growth outlook. The company's growth outlook remains positive, underpinned by its strong market position and continued focus on innovation and development. The historical trend suggests a pattern of steady growth, with the stock potentially surpassing the $300 mark in 2024.
- Expert's insight. Stuart Bromley's insights underscore the strategic decisions made by CSL during the pandemic. Such as the expansion of plasma collection centers, which positions the company well for future growth.
Bromley anticipates improvements in CSL's margins in the coming years, driven by a combination of reduced collection costs and falling inflation. This could also drive CSL's share price growth, potentially propelling it beyond its pre-COVID highs.
ResMed Inc. (ASX:RMD) - Opportunity amidst overreaction
ResMed, a global leader in sleep apnoea treatment, operates in over 140 countries and has 2 main business units: Sleep and Respiratory Care, and Software as a Service (SaaS).
- Current trading and performance. As of December 2023, ResMed's share price is 30% below its 52-week high, reflecting market fluctuations influenced by factors such as emerging weight loss drugs impacting its sleep apnea treatment market. Nonetheless, over the past 5 years, the company witnessed more than 60% hike.
- Annual growth outlook. The company's global presence and its focus on Sleep and Respiratory Care, coupled with its Software as a Service (SaaS) offerings, suggest a robust foundation for potential growth, leveraging its cloud-connected devices for data-driven healthcare solutions.
- Expert's insight. Bromley sees the recent dip in ResMed's share price as an overreaction. He believes the high cost and adherence requirements of weight loss drugs have been exaggerated in their perceived impact on ResMed's business, presenting an attractive investment opportunity at its current valuation.
"If this is indeed an over-reaction, the current share price provides an attractive opportunity to acquire a high quality, proven performer at an attractive discount. Like most businesses in the current climate, higher costs have seen reduced margins but we expect to see improvement as inflation eases," he said.
Do your own financial analysis
The in-depth analysis of Polynovo, CSL, and ResMed offers a clear picture of their potential in the ASX healthcare sector.
Polynovo's technological innovation, CSL's strategic positioning, and ResMed's market resilience highlight their appeal as investment opportunities.
Investors should undertake comprehensive research or seek professional advice for informed decisions.
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