Pengana has increased the weighting to healthcare in its High Conviction Equities fund to more than half of the portfolio as the sector looks set to be one of the few winners from the COVID-19 pandemic.
The High Conviction Equities fund only has 20 stocks and some 60% of these sat in the healthcare space, up from 40% previously.
In an investor webcast, manager James McDonald, said he had previously done well from healthcare stocks and was optimistic on their outlook.
“We are confident in the recovery of healthcare spending, there are not a lot of areas where we can be confident right now,” he said.
Healthcare is a very diversified sector, around half of the exposure is in cancer or COVID-19 diagnostics, some is in vaccine companies and a small part is in pharma companies.
While most of the increase came from increasing weightings to existing companies, he had also purchased new holdings in Australian firm Genetic Signature and US biotech firm Gilead.
“Genetic Signature is a medical diagnostics producer, it is a fast-growing industry, they are focused on infectious diseases and are developing a COVID test,” McDonald said.
“They have product launches imminent in the US and Europe and have been doing fundraising so they were already laying the foundations for global expansion and now COVID-19 has accelerated this.”
Meanwhile US mega-cap healthcare stock Gilead was attractive, McDonald said, as it was so cheap, trading at 13x PE with no debt and US$8 billion ($12.5 billion) in free cashflow.
“COVID-19 is the icing on the cake for Gilead. They have been doing a lot of drug trials and could develop an important drug treatment,” he said.
Since the start of the year to 22 April, 2020, the share price of Genetic Signature rose 68% while Gilead increased by 24%.
Meanwhile, cash in the fund stood at 15%, down from 20% as the firm took opportunities to pick up cheap stocks.
“Cash was at 20% but has gone down and we are looking for opportunities to buy stocks opportunistically. There will be more volatility and hopefully we can check on some names we are watching if they get to a lower price so it is nice to have cash on hand,” McDonald said.
Share price performance of Genetic Signature versus ASX 200 since start of year to 22 April, 2020
