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BB Healthcare looks promising after tough summer, long-term fundamentals intact

Snapshot

  • Invests in healthcare stocks around the world
  • Mainly invests in small- and mid-caps
  • Tough summer but history of outperformance
  • 4.85p divi targeted for 2019
BB Healthcare Trust PLC -

Quick facts: BB Healthcare Trust PLC

Price: 141 GBX

LSE:BBH
Market: LSE
Market Cap: £611.88 m
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One thing we can all agree on is the air up here at market highs is thin and that makes people twitchy. Compound this febrile environment with someone who thinks Twitter is a policy tool and macro volatility becomes the new normal.

Paul Major and Brett Darke, investment advisers

 

What it does

BB Healthcare Trust PLC (LON:BBH) is a healthcare trust focused on global healthcare equities. It is run by the management team behind the successful BB Biotech Investment Trust.

The fund invests in a maximum of 35 companies at any one time, and there are no restrictions on geographies, market cap or sub-sector.

Currently, around 21% of the fund is made up of mega caps – the household names such as Bristol-Myers Squibb Co (NYSE:BMY) that are worth upwards of US$50bn.

Another 23% or so is big caps, while small and mid-caps account for over half of the investments.

Although there are no restrictions on geography, the bulk of BB’s investments are in the US, which is perhaps unsurprising given that the US is home to the world’s biggest pharma market (by quite some way!).

Top ten holdings as of 31 October:

Align Technology (8.6%)

Anthem (8.2%)

Illumina (7.5%)

Teladoc (7.3%)

Bristol Myers Squibb (7.1%)

Humana (7%)

Intuitive Surgical (4%)

Insmed (3.3%)

Esperion (3.2%)

Jazz Pharmaceuticals (3.1%)

How it is doing

BB’s net asset value (NAV) has grown 12.2% over the year to the end of October, at 128.34p per share, with shares in the fund trading at a steep premium.

The healthcare sector is looking more promising, outperforming the wider market as economic data darkens.

Earlier this year, the fund blamed two stocks, Illumina and Align, for a less healthy performance.

 

 

 

Other factors also weighed on BB’s investments. As macro concerns persist, those traders who are still investing the healthcare sphere are moving their money into the bigger, ‘safer’ stocks, rather than the small and mid-caps that BB is largely invested in.

Blue sky

Back in July, BB argued that despite healthcare sector woes, long-term fundamentals of its companies are still attractive.

“In such volatile times, we must abstract ourselves from the noise and ask more searching questions about whether or not the medium-to-longer term fundamental outlook for the company’s holdings has changed,” said BB’s board back in July.

“In this regard, we remain resolutely of the view that the evolution has been resolutely positive.”

One of the fund’s managers, Paul Major, echoed those thoughts in an interview with Proactive, stating all that has happened over the past couple of months is that BB has given up some of the gains it had built up over the benchmark index.

“We delivered significant outperformance from inception up until the end of May, and what we’ve done is now given a lot of that up. But versus an investment in any of our peers, investors aren’t any worse off.”

In terms of future investments, Major said BB would like to increase its exposure to the smart medical devices and healthcare services markets.

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BB Healthcare's Paul Major upbeat on the trust's long-term fundamentals

BB Healthcare Trust PLC (LON:BBH) is a healthcare trust focused on global healthcare equities.  It is run by the management team behind the successful BB Biotech Investment Trust. Portfolio manager Paul Major says while things may be tough for healthcare investors right now, he's...

on 23/8/19

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