Lesson type: Understanding diversification, Understanding investment philosophy
The investment story you need to know about
While tech – and indeed world markets – buckled after Apple’s earnings downgrade earlier this year, there was a different sector that’s been getting far fewer headlines.
Healthcare, which has been described as “quietly outperforming,” has demonstrated its strength over the past five years in Australia and internationally. Consider the S&P/ASX 200 Health Care Index (XHJ), which has returned 6.43% over the ASX 200 over the past year. Mid-last year, healthcare outperformed “outperformed the technology sector to the greatest extent since mid-2016.”
One key benefit of the sector is its non-cyclicality, given that everyone is going to require healthcare at some point in their lives. Furthermore, advances in medical technology are leading to new approaches to diagnosis, treatment and prevention.
Of course, as the recent HBO documentary on the widespread fraud committed by medical technology company Theranos reveals, there’s also reason to be cautious about investing in the sector without proper due diligence. To understand the benefits and risks better, we recently sat down with the portfolio manager for the Platinum International Health Care Fund, Bianca Ogden, who explained the secrets to her success.
Ogden began her career working as a scientist trying to find new drugs for diseases like HIV and colon cancer. “That’s always been my passion,” she says. “When I had the opportunity to go look at the investment opportunity in healthcare, you see there’s so much going on – so many great innovations happening, new tools to look at genetics and so on.”
She contrasts her current role with her previous research duties, which were “focusing on one tiny little area of healthcare, whereas when you’re an investor you can look at anything: from a biotech company to medical device company that makes new types of heart valves. I like that diversity.”
Where one might assume a job like hers involves “looking at a lot of spreadsheets,” Ogden says that’s actually a very limited part of her role. “I spend a lot of time with the industry itself. I look at the new technology, I speak to a lot of doctors to see where the field is going.”
Platinum’s approach to investing in the global healthcare sector is unconstrained; one holding might be a small company “struggling to make money” and another might be a multinational like Johnson & Johnson. “What matters,” she says, “is if what they’re doing is innovative and different.”
“There are risks,” she clarifies, “but that’s mitigated through diversification. If a smaller company falls over, do they have something to fall back on, in the core of their technology? What is their cashflow? Do they have something else coming in?”
While new technologies in healthcare are rapidly emerging, she also says it’s important to remember they can take some time to be refined. For this reason, some of the stocks Platinum has held in the fund have been there for 10 years.
“You can be there at the start of the journey,” she says. “It’s a people’s business. You might think at a company like Johnson & Johnson that it’s too big for that, but the CEO knows what’s going on, the underlying science.”
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