Health is wealth
As well as differentiating in the IHT AIM space by having a lower median market cap than many of our competitors, our go anywhere ability allows us true flexibility to diversify across up to 40 stocks, yet still take high conviction positions in certain sectors (up to 30% per sector).
Through analysis of history and our own experience, the much fabled ‘multi-baggers’ that are able to return multiples on initial capital invested are overwhelmingly found in both the Software and Healthcare sectors.
We believe that the lines between the two sectors are becoming increasingly blurred as technology increasingly disrupts the Healthcare sector; one that has been slower than most other industries in embracing productivity-enhancing technology.
As an aside, we deliberately target such ‘hybrid’ companies that straddle two industries as it can create an ‘analysis gap’. In this case the Software analyst not fully appreciating the dynamics of the Healthcare market and the Healthcare analyst not fully appreciating the dynamics of the Software market. Falling between two stools can often lead to valuation opportunities ripe for exploiting for those prepared to see the bigger picture developing.
We prefer those companies supplying services into the Health industry, akin to the ‘picks and shovels’ trade during the goldrush. This avoids the binary risk of a pioneering drug discovery company, while retaining companies often possessive of strong intellectual property and high returns on capital.
The sector lends itself to buy and hold with the power of compounding allowed to flourish over the fullness of time. We highlight two such ‘hybrid’ investee companies:
EMIS is a software provider across a variety of healthcare settings from: Primary care, Community, Acute care, Community pharmacy and Digitally enabled patient care (Patient access is the UK’s leading GP online services platform).
The majority of its revenues come from this division, but the faster growing division is its Enterprise offering, where revenues are derived predominantly from the business-to-business healthcare sector including pharmacies and life sciences.
Their CEO on a recent results call wasn’t overstating things when he said if “EMIS fell-over the NHS would too”. Their software underpinned a key part of the vaccine roll-out recently too and EMIS sits right at the heart of changes in healthcare towards emerging integrated care systems, where EMIS software is key to bringing together both health and social care. This will unlock significant efficiencies, cost savings while enhancing patient outcomes. A win-win scenario for the patient and the tax payer.
Oxford Metrics (OMG)
Within OMG sits Vicon, a technology that spans a multitude of large and global markets, for example, Hollywood where it is used for special effects production (think green screens and white measurement balls attached to actors) and even NASA for engineering performance monitoring.
It is known globally as the gold standard for measuring objects and or people in space. It also has real world applications in the medical profession where it is gaining strong traction in treating injuries across a whole range of sports.
Vicon’s hardware and software solutions measure minute differences in loads, force, and gait to detect underlying injuries, often unbeknownst to the athlete themselves. Its solutions are also used in clinical settings as part of amputee rehabilitation, lower limb movement studies, cerebral palsy research, motor control, and neuroscience.
To learn more about the Stellar AiM IHT Service and how it could work for your clients, contact one of the Stellar team today on 020 3195 3500 or visit our service page.
Written by Stephen English
Stellar Asset Management Limited does not offer investment or tax advice or make recommendations regarding investments. Prospective investors should ensure that they read the brochure and fully understand the risk factors before making any investment decision. The value of investments and the income from them may fall as well as rise and is not guaranteed. No assurance or guarantee is given that any targeted returns will be achieved. Forecasts of potential future results are not a reliable indicator of actual future results.
Stellar Asset Management Limited of Kendal House, 1 Conduit Street, London W1S 2XA is authorised and regulated by the Financial Conduct Authority.