28 January 2026
Alvia Senior Investment Analyst Daniel Martin was interviewed by The Australian for his views on the healthcare sector, ahead of what is shaping up to be a challenging profit-reporting season.
Healthcare has tested even the most patient investors. Despite its reputation as one of the most defensive parts of the market, the sector has underperformed the broader ASX by around 50% over the past five years. In many cases, that gap reflects sentiment rather than fundamentals.
In the interview, Daniel pointed to shifting narratives within the sector, particularly around ResMed. The impact of GLP-1 weight loss drugs, once seen as a clear headwind, has become more nuanced. While weight loss may reduce sleep apnoea incidence at the margin, rising awareness of the condition continues to support demand for treatment, alongside ongoing growth in both devices and consumables.
Daniel also highlighted Sonic Healthcare as a case study in pathology, noting both the challenges and the opportunity.
“The US business is a management distraction and a drag on margins,” he said, adding that management will need to assess whether capital has been deployed effectively in recent expansion efforts.
Despite this, Daniel sees scope for improvement rather than deterioration.
“There is more room for margin expansion than for margin contraction,” he said, pointing to Sonic’s strong cash generation, approximately 7% free cash flow yield.
More broadly, with valuations well below long-term averages and global healthcare stocks trading at GFC-era earnings multiples, we believe the market has overreacted to negative news.
As companies report through February, investors should gain clearer insight into whether healthcare’s prolonged underperformance is justified or overdue for reassessment. At Alvia, we believe the balance of risk is increasingly shifting toward the latter.