The sector had a powerful driver from the ageing population which would build long-term earnings growth.
There were several high-quality companies to choose from including Ebos Group, Fisher & Paykel Healthcare, Ryman Healthcare and Summerset in New Zealand and, in Australia, CSL Ltd, Ramsay Healthcare and ResMed, he said.
Due to advances in health technology, higher living standards and a declining birth rate, populations in the developed world were getting older on average.
The older population growth was important as according to the New Zealand Ministry of Health, those aged 65 and over used 42% of health services despite making up only 15% of the population.
As a result, the ageing population was a key driver for the healthcare sector and had in part driven its strong performance in recent years.
As an example, in the past 10 years, Ramsay had grown its dividend by 364%, an annual growth rate of 16.6%, Mr Timms said.
Similarly, Australian peer CSL had increased its dividend by more than 400% during the same decade period, delivering an average annual growth rate of 17.6%.
The size of the impact had also been demonstrated visibly in the New Zealand retirement sector.
In the face of increased demand, Ryman had grown from fewer than 1000 units and beds when listing in 1999 to more than 9000 currently, he said.
It now also planned to develop three villages - one in Auckland, one in Melbourne and one elsewhere in New Zealand.
Summerset had achieved growth in its total number of retirement units by 93% in the past five years to about 3000 and had increased the total number of care beds by 129% to about 750.
While the ageing population was not a new trend, and was one Craigs had been discussing for some time, its full effect was yet to be felt, Mr Timms said.
The trend would accelerate due to the so-called ''baby boomer'' generation. Statistics New Zealand was forecasting the population aged 65 and over to more than double over the next 30 years, an annual growth rate of 2.3%.
Similarly, the 85-plus demographic was expected to almost triple in the same period, growing at more than 4% each year.
The 65-plus age group would then go from 15% of the population to 24% and the 85-plus group would move from 2% of the population to 5%.
As a result, the Treasury had forecast government healthcare spending to increase from 6.8% of GDP now to 10.8% by 2060.
In addition to the ageing population, there were additional factors supporting long-term earnings growth for healthcare, he said.
They included increased rates of diagnosis, higher incomes in emerging markets, improved technology and the increased incidence of chronic disease.
''There are some challenges to overcome, namely increasingly pressured government Budgets and a move to outcome-based payments rather than the current fee-for-service model. We expect high quality companies to adjust and embrace new opportunities.''
Those trends also created opportunities for companies like FPH and ResMed, capitalising on the trend towards home care, Mr Timms said.
Companies operating in the healthcare sector generally provided critical care and essential services, meaning earnings tended to be less sensitive to the economic cycle - one less likely to defer urgent healthcare needs.
The Australian economy had been patchy after the unwinding of the resource-led boom and consumer spending had been weak.
In that environment, Craigs saw companies with defensive earnings as especially attractive, he said.
Some sectors did display cyclical characteristics. The New Zealand retirement sector was highly leveraged to property prices.
It was also worth noting that aspect of providing critical care meant regulatory risk was often never more than an announcement away. Historically, uncertainty surrounding regulatory change had often provided an opportunity to buy, Mr Timms said.
Another investment theme recently identified in the transtasman markets was a preference for companies with a high proportion of earnings derived offshore, particularly in the United States.
Of the core healthcare holdings Craigs Investment Partners favours, those with sizeable offshore earnings were FPH, ResMed and Ramsay.
