UK Edition
Almost a year ago we called the bottom of the market in biotech stocks and advised readers to buy our two preferred trusts in this sector. As so often in the stock market, our analysis was sound but our timing was faulty.
Specifically, we said Biotech Growth looked good value at £11.70, as did International Biotech at 715p. Their respective share prices are now 967p (an 17.4pc fall) and 669p (6.4pc lower). Both were trading at about par value, compared with discounts now of 5.7pc and 5.5pc respectively.
If Questor, therefore, says to you “well, this shows that now is an even better time to buy”, you are entitled to retort: “What’s to stop the same thing happening and the share prices falling further?”
That is always a pertinent question and one that should be addressed whenever there is a temptation to buy a stock that has fallen. Our answer on this occasion is that there are clear signs in the biotechnology market more broadly that a recovery is establishing itself.
The Nasdaq Biotechnology index, the sector’s key benchmark, has been on a rising trend since June and in recent weeks Goldman Sachs, the investment bank, has discerned another promising sign: what it called a “decoupling” of biotech share prices from the broader technology sector, which has been suffering from rises in interest rates.
Either Biotech Growth or International Biotech is in this column’s view a sound way to gain exposure to one of the great growth themes of the coming decades: the drive to cure more diseases. We continue to prefer these two trusts to BB Biotech, a Swiss alternative.
For investors attracted by biotech but inclined to take less risk, we have long been enthusiasts for Worldwide Healthcare, which invests in a wider range of businesses; it is run by the same management company as Biotech Growth.
Questor says: buy
Tickers: BIOG, IBT, WWH
Share prices at close: 967p, 669p, £33.10
Update: 3i Infrastructure
We are off to a good start with this trust, tipped here just a month ago at 314p and already 4.8pc higher at 329p. We may have been fortunate with our timing as this trust, like so many income‑producing assets, was caught up in the chaos that followed the mini‑Budget, but the fund also published a positive interim report this week.
It reported a 9.3pc total return, on the basis of its net asset value, for the six months to the end of September, which is substantially ahead of its target return of 8pc to 10pc a year. The NAV at the end of the period was 325.8p, compared with 303.3p at the end of March.
The interim dividend of 5.575p is 6.7pc higher than the half‑year payment last time and the trust said it was on course to pay 11.15p for the full year, also a 6.7pc rise and expected to be fully covered by earnings.
Analysts at Investec, the bank, said: “We believe that 3i Infrastructure gives investors exposure to a high‑quality portfolio of economic infrastructure assets and a management team that can demonstrate a significant depth of resource to originate and manage a portfolio of infrastructure assets.
“The portfolio continues to perform strongly and given its positive value correlation to both inflation and power prices, which are expected to remain elevated, we believe the portfolio remains well‑placed to deliver attractive total returns.” Hold.
Questor says: hold
Ticker: 3IN
Share price at close: 329p
Investment trust news
JP Morgan Russian Securities wants to change its investment mandate and name to allow it to invest more widely across “central, eastern and southern Europe (including Russia), the Middle East and Africa”. Currently its Russian assets are untradable. A general meeting to approve the proposals will take place on Nov 23 and shareholders who want to take part or vote should contact their broker.
JP Morgan Global Growth & Income is to absorb JP Morgan Elect if shareholders approve the merger at a general meeting. The date has yet to be announced.
Princess Private Equity has unexpectedly cancelled its dividend because of the cost of settling currency hedging contracts. The shares fell by 16.3pc on the day of the announcement.
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