The broker pitch goes something like this: "People will not stop getting sick in a downturn and operating earnings have risen for 20 consecutive years. Ramsay Health Care is recession proof. That, Mr Jones, is why you should BUY."
On the face of it, that discussion makes sense. Ramsay Health Care is a phenomenal business and now accounts for 26% of the private hospital industry.
The sheer size of the business offers it extra leverage to squeeze out cost advantages when buying medical consumables such as bandages and syringes, and the company has significant discussion power with private health insurers.
Ramsay's global expansion has also been well managed, which has decreased its reliance on Australian revenues, and the company is set to benefit from an ageing population more than almost any other.
The odd elective surgery may be postponed but, for the most part, Ramsay really is recession proof.
Sadly, this is the point where the broker's argument falls apart; recession-proof businesses aren’t the same as recession-proof investments.
No comments:
Post a Comment