Complete your registration today for a chance to win £50 John Lewis vouchers in our weekly draw Enter now
David Kimberley
View profile
Updated 06 Mar 2023
Save Article Download

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Bellevue 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.

  • In the year to 30/11/2022, Bellevue Healthcare (BBH) delivered NAV total returns of -4.1% and share price total returns of -11.9%. That compared to a 14.1% total return increase in the trust’s benchmark, the MSCI World Healthcare Index (GBP).
  • It was a year of two halves for the trust. Rate hikes and the invasion of Ukraine in H1 led to a sell-off in the more growth-oriented, small caps that BBH holds. Recessionary fears tampered in H2 and BBH outperformed the benchmark in NAV terms by 5.3% in the second half of the year.
  • BBH continued to trade at a premium for the first half of the year, allowing the board to issue 27,872,179 shares in the period, with total proceeds of £49,167,000.
  • However, the trust has traded at a discount since June and, since the period end, the board has bought back 4,090,001 shares. A further 30,577,550 shares were redeemed by shareholders via the board’s annual redemption facility after the period end, representing 5.2% of the trust’s share capital.
  • BBH paid dividends of 6.47p per share during the period, compared to 6.03p in FY21. The board aims to pay a dividend equal to 3.5% of year-end NAV. This means the target dividend for the current period is 5.99p per share, reflecting last year’s performance.
  • Chairman Randeep Grewal noted that the trust’s small cap exposure has made it more sensitive to interest rate hikes and other macroeconomic factors, even if company fundamentals haven’t changed substantially.
  • “We hope that the New Year will bring improved performance that in turn will attract buyers and contribute to a narrowing of the discount and ultimately share price appreciation,” he added.

Kepler View

Bellevue Healthcare (BBH) has built an impressive track record since its launch in 2016. The trust runs a concentrated portfolio of growth-oriented healthcare companies, with no sectoral or geographical limits imposed on the managers.

Last year was not easy for growth investors in the healthcare sector. Smaller, earlier stage businesses were seen as being more susceptible to the risks incurred by rising interest rates and a wider economic downturn. At the same time, with bonds and equities falling concurrently, investors tended to de-risk and allocate more of their equity exposure to large caps than smaller companies. An easing of recessionary fears and a downshift in the pace of rate hikes was likely a factor in BBH’s better performance in the second half of the year and through into 2023.

Managers Paul Major and Brett Darke remain cognisant of the risks that higher rates pose but believe they are largely protected from them. In BBH’s December factsheet they noted that, even if higher rates were factored into current valuations, it would not change their view of the companies in the portfolio.

As can likely be inferred from that, the two managers believe that share price fluctuations over the last 18 months have largely been driven by macroeconomic predictions, as opposed to company fundamentals. This meant Paul and Brett felt confident enough to add to the portfolio, as well as to existing positions, in 2022. They also added to their own holdings in the trust during the period, with Paul arguing that the first quarter of 2022 is ultimately going to be seen as a historic buy opportunity.

Although further volatility cannot be ruled out, we think the pair’s confidence is not unjustified and backed by a strong long-term record. None of the fundamentals driving healthcare have changed over the last 12 months. Spending on the sector continues to grow at a faster pace than GDP in many developed countries, necessitating the sorts of innovation that companies in the BBH portfolio can provide. There is also no sign that the aging populations driving that spending are going to disappear.

We think BBH looks interesting at this juncture as a result. Companies in the portfolio are being driven by secular trends that look unlikely to dissipate in the near or long-term future. The trust has an estimated forward yield of 3.6% and is trading on a rare discount of -6.7% as at 24/02/2022. While there are no guarantees in a fickle market, this discount may tighten if performance remains strong and sentiment toward smaller, growth-oriented companies of the sort favoured by the managerso improves.

Login to read the full article...

Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.

Continue

Welcome to Kepler Trust Intelligence

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.
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.