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3 Healthcare Stock Picks for July

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Healthcare is one of the largest industries in the world. It’s also one of the most profitable—if you pick the right stocks.

Over the following months, years, and decades, many companies are positioned to tap growing demand for their products and services. Some are taking market share from competitors, while others are pioneering entirely new markets.

If you want to take advantage of the hottest trends in healthcare, now is your chance.

Here are your top options to buy this month.

Start small

Extendicare (TSX:EXE) is a tiny company with a $750 million market cap. However, its 5.7% dividend is well above the industry average.

If you want to take advantage of an aging population, this is the stock for you.

Extendicare owns 120 long-term care and retirement residences throughout Canada. The more society ages, the more this company benefits. Looking at Canada’s demographic dilemma, an aging population is a sure-fire bet.

“With the tailwind of an aging population and favorable policy trends, we have a significant opportunity to not only make a real difference in senior care, but also to drive revenue growth, bottom line results and value creation for our shareholders,” said company CEO Michael Guerriere.

The company has committed to paying out most of its earnings in the form of a dividend. That’s what accounts for the above-average yield. While the payout has varied, management has distributed a regular dividend for more than a decade.

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Next level

Drone Delivery Canada (TSXV:FLT) sounds like a fad, but this opportunity is very real. Shares are down 35% over the past 12 months, giving investors a discounted way to profit from this high-growth company.

Drone Delivery is disrupting the transportation paradigm for some of the most remote communities on the planet. Canada is the ideal starting point.

Canada has remote communities unconnected by major road systems in nearly every province. The price of goods in these communities can be outrageously high, and medicine and surgical tools can be difficult to source.

With customized drones, Drone Delivery is able to deliver these necessities days or even weeks faster than the competition.

Shares just dipped below a $200 million market cap, but this could become a $1 billion market in Canada alone. Globally, the opportunity is worth $10 billion or more, with the spoils going to the drone delivery company that scales fastest.

Bet on aging

Chartwell Retirement Residences (TSX:CSH.UN) is Canada’s largest owner and operator of senior living facilities. That’s a great business to be in. As Canadians age, Chartwell should succeed.

In 2019, management executed on several growth opportunities. So far this year the company has added 1,169 suites, with another 402 suites in construction. An additional 767 suites are in pre-construction. It also retained options to acquire 2,744 more suites in 2020 and beyond.

Net operating income, one of the best metrics for success in this industry, grew last quarter to $71.1 million, an increase of $3.2 million versus the year before. That’s an annualized rate of $285 million.

With a market cap of $3.3 billion, Chartwell trades at a NOI yield of 8.7%. Valuations in other regions and sectors can be as low as 3% or 4%. Even using a NOI yield of 6% results in potential upside of around 50%.

Chartwell stock is ridiculously cheap despite its 3.9% dividend and multi-decade growth path.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Vanzo has no position in any stocks mentioned. Extendicare is a recommendation of Stock Advisor Canada.

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