BB Healthcare

BBH is a potentially interesting addition to growth portfolios and for investors looking for income...

Add to watchlist Download View key data

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BB Healthcare. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

BB Healthcare

BB Healthcare Trust (BBH) is a highly actively managed trust, seeking to exploit a long-term secular growth theme. The managers (Paul Major and Brett Darke) invest in a concentrated portfolio of companies providing new approaches to transform what they view as fundamentally broken healthcare systems around the world.

Using the closed-ended structure, Paul and Brett aim to take a longer-term view than the market. That said, the pandemic has shone a light on trends that they have long thought likely to emerge. As we discuss in the Portfolio section, the experience of seeing a GP during lockdown shows the potential for the NHS to save significant amounts of money on ‘digital first’ consultations, illustrating how models of care might soon shift very significantly to the benefit of many of BBH’s portfolio companies.

That said, the managers’ valuation-aware approach to growth investing means they are currently cautious, as evidenced by the portfolio’s defensive positioning and cash levels of c. 9% (see Gearing). The team believe capacity on the supply side (especially elective operations that can be easily delayed without risk to the patient’s life such as hip or knee replacements), and a longer time than people expect to ‘return to the norm’, will lead to some companies’ revenue and earnings expectations being revised down over the near term.

BBH targets a Dividend payout equal to 3.5% of the prior financial-year-end NAV. This dividend is funded from capital reserves, and the current target of 6.03p equates to a dividend yield of 3.2%. The strong Discount control mechanism (an annual redemption option every November), as well as good demand for the shares, has meant BBH’s shares usually trade close to NAV. It has been issuing shares this year, meaning we expect the ongoing Charges to be marginally lower this year than last year’s 1.19%.

Analyst's View

BBH’s managers, Paul and Brett, are specialists in what is a complex field. It is an area of the market that in our view offers highly attractive secular growth opportunities, which are likely to prove resilient and to some extent unlikely to be derailed by the economic cycle. The team employ a highly active approach to stock-picking on a global basis, with a very concentrated portfolio.

As we discuss in Performance, returns since the December 2016 IPO have been strong, and are ahead of the trust’s twin objectives. Despite the various macro headwinds all investors had to contend with, 2020 saw a continuation of this strong performance, with BBH performing significantly ahead of the benchmark and its directly comparable investment trust peers, which we think amply demonstrates the resilience of the strategy even in the most challenging of market conditions.

In our view, the differentiated investment approach and highly concentrated portfolio have been key contributors to this sustained success, but also add to risks. The statistics bear this out; whilst BBH’s NAV volatility has been higher than peers (making it more suitable for long term investors), the superior Sharpe ratio demonstrates that the managers have used this extra volatility to good effect for investors.

Aside from performance, BBH has several shareholder-friendly features including low discount volatility, high dividend security and a simple and transparent fee structure. Over the short term, BBH’s positioning arguably offers an interesting exposure to benefit from a post-pandemic recovery, without the risks that other ‘defensive’ sectors (such as consumer cyclicals) present.

BULL
BEAR
Highly differentiated offering, with highly active approach
Narrow focus, and concentrated portfolio presents risks relative to more diversified portfolio
Strong track record, added to over 2020
Dividend based on NAV, which means that if the NAV falls year on year, it could mean a decline (although the board could choose not to pay a lower dividend)
Attractive dividend yield (albeit paid from capital)
Potential to gear, combined with concentrated portfolio, can translate into high NAV volatility
William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.