Let’s start with a question: Which sector of the ASX is flying under the radar, yet may be full of potential?
If you said Healthcare, you’re on the right track.
However, with recent advancements in AI and robotics, Australia’s biotech sector is gaining significant momentum, making now the perfect time to explore the key players leading this charge.
Identifying the right companies at the right price can yield exponential returns, especially in a sector historically characterised by volatility.
But before diving into our top stock picks, let’s take a step back and examine the broader landscape to appreciate the real value potential at hand.
Australian biotech industry ranks 5th
Currently valued at $1.2 billion, Australia’s biotech industry ranks fifth worldwide in research and innovation.
It has experienced a steady annual growth rate of 2.4 per cent over the past five years, and analysts anticipate that demand for precision therapies, digital health solutions, and affordable medical advancements will continue to propel this growth.
This rapid expansion positions Australian biotech as an attractive investment opportunity for those eager to engage in a sector that is crucial for both global health and economic development.
Adding to the potential is the fact that Australia has already made a substantial impact on the global stage, with notable breakthroughs such as the bionic ear and the Gardasil cervical cancer vaccine.
However, bringing a biotech product to market is no small feat, often fraught with regulatory hurdles and lengthy development cycles that can span a decade or more.
This reality underscores the appeal of investing in established companies, which have navigated these challenges and built strong partnerships, robust networks, and the expertise necessary to overcome regulatory obstacles.
3 Australian biotech companies to watch
CSL (ASX:CSL) is the third-largest company on the ASX by market capitalisation—behind only CBA (ASX:CBA) and BHP Group (ASX:BHP) – it stands as a global leader in innovative therapies, with a focus on plasma-based products and vaccines.
Since 2020, CSL’s stock has fluctuated between $240 and $320. However, after bouncing back from $250 in October 2023, the share price has experienced its strongest upswing since March 2020, gaining 37 per cent.
While this growth is encouraging, significant resistance remains at $320, indicating that the stock must clear this level to establish a sustained long-term upward trend.
ResMed (ASX:RMD) is a pioneer in sleep apnea treatments and respiratory care, with a solid presence in digital health technologies.
After experiencing a sharp decline of 30 per cent from August 2023, ResMed rebounded, surging over 70 per cent by the end of October 2024.
This recovery reflects the company’s resilience, and as the stock nears its all-time high, a retest of this level looks to be on the horizon. A breakout above this peak might signal the beginning of a new long term bullish trend.
Sonic Healthcare (ASX:SHL) provides vital pathology, imaging, and clinical services globally. Following a steady decline since its 2021 peak, Sonic is now trading at a crucial level.
If it maintains support above $26, there’s potential for a rally toward $36, with a longer-term objective of reaching its all-time high. Conversely, a drop below $26 could prompt a retest of the $23 level.
Best & worst-performing sectors
The best-performing sectors for the week include Information Technology, up more than two per cent; followed by Consumer Discretionary, up over half a per cent; and, Materials, up under half per cent.
The worst-performing sectors include Consumer Staples, which are down five per cent; followed by Utilities, down three per cent; and, Energy, which has shed more than two per cent.
The best-performing stocks in the ASX top 100 include Mineral Resources (ASX:MIN), up over 15 per cent, followed by WiseTech Global (ASX:WTC) and Pro Medicus (ASX:PME) which both gained more than five per cent.
The worst-performing stocks include Paladin Energy (ASX:PDN) down over 16 per cent, followed by AGL Energy (ASX:AGL), down over nine percent and Woolworths Group (ASX:WOW) which lost more than eight per cent.
What’s next for the Australian stock market?
The All-Ordinaries index has dropped more than half a percent this week, marking a second consecutive week of selling pressure. As noted in my previous report, this decline was anticipated, and the 8,300-point level should be monitored for potential buyer support.
I also mentioned last week that November is likely to bring heightened volatility, especially with the US elections approaching.
Additionally, the Reserve Bank of Australia’s interest rate decision next week has already caused significant movement in various sectors, particularly the consumer staples sector.
Known for its stability, the consumer staples sector has seen a sharp decline of five percent this week.
Why such a drastic drop?
One contributing factor is that higher interest rates typically lead to increased borrowing costs, which can dampen consumer spending.
This trend is especially relevant for the consumer staples sector, which depends on consistent demand for essential goods.
Notably, on September 23, just before the last rate decision, the consumer staples sector plummeted nearly three percent in a single day.
Now that we are just days away from the next RBA decision, we are witnessing another uncharacteristic decline in this sector, indicating that the market may be anticipating that the RBA won’t cut rates next week.
If this scenario unfolds, it may be wise to shift focus back to the banking sector, which tends to benefit from a higher interest rate environment.
Looking ahead to November, historical trends suggest that prices typically rise.
If this week represents the extent of sellers’ influence during what is usually their strongest month, we might be positioned for a significant rally as we approach the end of the calendar year.
For now, good luck and good trading.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%.
He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au.
Disclaimer: While Wealth Within holds an Australian Financial Services License (AFSL:226347) the information featured in this program is general in nature and therefore should not be relied upon.
Before making any investment decisions, you should consult a licensed professional who can advise whether your investment decisions are appropriate for you.