Artemis’ Page backs healthcare despite ‘wobbles’
Recent “wobbles” in the healthcare sector have not deterred Artemis manager Mark Page from favouring companies in the industry, which he likes for strong compound earnings.
Mr Page, who co-manages the £298m Artemis European Opportunities vehicle, acknowledged the sector had endured “ebbs and flows” of positive sentiment recently but remains confident about the merit of his chosen stocks.
The MSCI Europe Healthcare index has returned 9.9 per cent over the last year, but is down 8 per cent over the last six months and 4.4 over the last three, according to FE Analytics.
The fund had a significant weighting to healthcare — including its three biggest holdings — and made up a total of 18.9 per cent at the end of October. However, this does not extend to biotech which he said is “too risky”.
Swiss pharmaceutical company Novartis was the largest holding in the portfolio at 4.4 per cent. Roche Holdings made up 4.1 per cent and Novo Nordisk 3.4 per cent.
Novartis has endured a somewhat volatile year, selling at CHF0.84 on January 22 before rising to a high of CHF1.02 by July 20. It then reached a 2015 low on December 14 of CHF0.82.
Healthcare stocks in the US have also suffered after political pressure following comments made by presidential hopeful Hilary Clinton. Some investors have been moving away from the sector.
But the manager is convinced the compound earnings of his holdings are strong enough to warrant their continued inclusion in the portfolio.
Mr Page said: “We like Novo Nordisk [and] Essilor. We have got drug pricing issues in the US but if we look back over time, the healthcare industry has ebbs and flows. The wobbles because of Clinton were wobbles but these companies have done incredibly well.”
Elsewhere the manager, who typically keeps holdings for 1.5 years, added French company Edenred, which provides prepaid vouchers, after it was punished because of its exposure to Latin America.
A recent update for the fund noted that the firm derives most of its profits from the region, adding: “Investors have left this economic zone en masse and Edenred has been a collateral victim.”
The firm’s share price has fallen significantly since the summer, dropping from €24 (£17.40) on July 17 to €16.4 on December 14.
However the fund’s update noted the manager believed it to be a “resilient business”, citing low requirements for operating capital, strong cashflows and effective barriers to entry.
On adding the stock the managers paid 20 times earnings - the lowest multiple since the company listed in 2010.
Mr Page said: “In Brazil there is a shadow economy but you could use vouchers to pay for things and feed your kids. That could mean great growth for Edenred.
“They got smacked because the Brazilian economy is declining. The market got a bit obsessed with this [decline] and punished the wrong company. Unless the Brazilian economy declines in double digits, this company will be fine.”
According to FE Analytics the fund has returned 34.2 per cent over three years, compared to 30.7 per cent from the Investment Association Europe ex UK peer group.