BB Healthcare Trust PLC (LSE:BBH)'s exposure to mid and small caps marks it out from peers and the benchmark but also explains the relative performance over the last six months or so, according to new research from Kepler.
"... the sell-off in markets we have experienced has been indiscriminate – especially amongst mid and small-cap stocks to which BBH is largely exposed," said the research house.
As a result, BBH’s NAV has underperformed over the short term, although the managers’ long-term track record against the trust’s twin objectives remains strong.
The managers’ [Bellevue Asset] view is that “history will look back on this moment as a fantastic relative opportunity for long-term healthcare investors” and so have been adding to gearing, noted Kepler.
The team have marginally increased the number of stocks in the portfolio (to 33), as well as invested more capital in portfolio constituents in the specialist diagnostics, biotechnology and services sectors.
“In our view, this illustrates their confidence in long-term prospects, but also that they are truly fundamental stockpickers,” Kepler said.
Since launch, a large part of the dividend has been funded from capital, which enables shareholders to benefit from a regular income but does not hinder total returns.
“As such, BBH offers a very complimentary exposure to equity income investors, with an attractive level of dividend derived from capital and an underlying exposure that is very different from typical income exposures to the healthcare sector.
“Investors who share the conviction of the manager in the medium to long-term fundamental prospects of the portfolio companies may see the current discount level of 6% as an opportunity, given the long-term average premium to NAV that the shares have traded at historically,” Kepler concluded.