Having said this, I think there are far better passive fund options for those wanting to really grow their wealth over time. 

FTSE 100 beater

We’ve known for some time that populations across the world are ageing and the demand for healthcare will only increase as a result. The coronavirus pandemic has merely served as a further shot in the arm for the sector. One way of tapping into this is through the iShares Healthcare Innovation UCITS ETF.

With almost two-thirds of the portfolio made up of US stocks, performance at the fund has been excellent. By the end of last month, it had gained 69% since launch in 2016. That return becomes even more impressive when you consider the low 0.4% ongoing charge. For comparison, the FTSE 100 is down 13% over the same period. 

Considering the defensive qualities of the industry, I think this 137-stock fund looks a solid long-term buy for anyone averse to actively picking stocks. 

Look overseas

It’s understandable that many UK investors like to invest their money in their (highly regulated) home market. The problem with this approach, however, is that your capital isn’t as well diversified as it could be. With Brexit likely to rattle on for some time to come, this could compromise returns.  

One way around this is to buy shares in passive funds tracking markets in other parts of the world. For me, the iShares Emerging Markets Core UCITS ETF is one that stands out.

The fund has exposure to 2,700 stocks, including mid- and small-cap companies. As experienced Fools will know, it’s often these firms that can turbocharge performance. The ongoing charge is just 0.18% — not much more than a FTSE 100 tracker. 

By far the biggest draw for me, however, is the fact that some of these markets trade on even cheaper valuations than the UK! When you consider how much the economies of India, Vietnam and South Africa could evolve over the next few decades, now looks like a great time to get involved. 

Get some gold

The gold price has lost some of its shimmer in recent weeks but I think Fools should still have some exposure to the precious metal. After all, its tendency to rise when shares fall may come in handy as the full economic impact of the coronavirus is felt across the world. Despite already performing superbly in 2020, some in the market are suggesting the gold price could rise as high as $3000 per ounce.

A simple fund that tracks the gold price will likely be suitable for most investors. Those with far greater risk tolerance, however, could buy the VanEck Vectors Junior Gold Miners ETF. Its 81-stock portfolio may end up being a lot more volatile than a typical FTSE 100 tracker but it’s arguably a far safer way of betting on the shiny stuff than holding shares in a single company.

Since launch in 2015, the fund has returned a little over 18% annually. The management fee is 0.55%.

The post Forget the FTSE 100. I think these ISA-ready passive funds are begging to be bought! appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Before explaining why, let’s have a recap.

What’s behind Synairgen’s rise?

Monday’s share price jump followed news of a successful trial of a treatment. labelled SNG001 (an inhaled dosage of interferon beta), in patients who had been hospitalised as a result of coronavirus.

Results showed those who received the drug in a double-blind trial (where neither the patient nor the clinician knows who is getting what) had a 79% lower risk of severe disease compared to those who received the placebo. Those on SNG001 were also more than twice as likely to recover than those who didn’t receive the drug.  

With concerns that the arrival of winter could bring about a fresh wave of the coronavirus, news that the treatment helps the lungs to tackle the virus, even in the event of co-infection (e.g. if a person catches flu), is clearly very positive. 

Can the share price keep rising?

Here, from an investment point of view, is where things get tricky.

What’s important to remember — and the company clarified today — is that the recent positive outcome was a Phase 2 trial. This phase is “designed to test the efficacy of a drug and takes place before the drug is approved or able to be marketed.” In other words, a lot of questions still need answering.

While positive that patients in both groups were matched with each other in things like age, this trial involved just 101 patients — a very small sample. Also, all were recruited in the UK, which means results might not be generalisable to other countries.

Nor did every finding from the trial reach statistical significance. In other words, we can’t be absolutely sure that what was found wasn’t just down to luck. Naturally, all this makes a much larger trial of the treatment (Phase 3 of drug development) absolutely essential. 

In short, I think SNG001 is still far from the sure thing the market presumably now believes it to be. For me, this has implications for what the Synairgen share price will do next.

The problem is that not everyone will want to stick around for the ride. It will, after all, be a few weeks before the company is ready to reveal the outcome of further analyses. If I were a trader and knew this, I’d seriously consider banking some profit on Synairgen.

And if I were a Foolish investor buying stocks for the long term (and I am), I’d be sure to appreciate that some in the market work on much shorter timescales and act (or not act) accordingly.

Buyer beware

Synairgen could certainly still reward those buying in now. However, I would caution anyone against thinking they can make easy money in a set period of time. It’s very easy to find examples of promising treatments that failed to live up to the initial hype and progress beyond Phase 3.

We must not allow our desire for a quick profit to override our true tolerance for risk. If you’re going to expect anything from the share price, expect volatility. Don’t bet the ranch and ensure you’re diversified elsewhere.

The post The Synairgen share price has rocketed 500% in two days! Here’s what I’d do now appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Is this an easy route to riches? Probably not, and here’s why.  

The problem with penny stocks

Now, don’t get me wrong: you certainly can become very wealthy if you buy the right minnows at the right time. But there’s the rub – identifying penny share winners and timing your purchases early enough is fiendishly difficult given the huge number of factors that determine whether a company succeeds or not. A potentially great business doesn’t always translate to a great investment. 

As well as being hard to sort the wheat from the chaff, those wanting to invest in this part of the market must also be aware of how ‘illiquid’ penny stocks can be. Liquidity means how easy it is to buy or sell something without affecting its price. Illiquidity can be great when the herd wants to buy (causing shares to jump) but a nightmare when everyone sprints to the exit. Forced sellers must often accept prices that, in normal circumstances, they would laugh at. 

The huge volatility seen in penny stocks is worth remembering right now. It would be wrong to assume that many of those coronavirus-linked stocks that have soared over the past few months won’t suddenly tumble in value. This may be due to another broad market crash, traders banking profits, or news that the products they supply are no longer needed or ineffective.

It doesn’t stop there with penny stock drawbacks. Young companies, particularly those in high-risk, high-reward sectors, often need to tap the market for more cash just to keep the lights on. Sadly, this isn’t always forthcoming and many are forced to fold, making the shares worthless.  

Make no mistake, penny stocks can make you rich but they’re also far more likely to leave you poor.

A better solution

Rather than attempt to find the needle in a haystack, there are other, safer ways of tapping into healthcare or biotechnology.

For the former, you could always buy a FTSE 100 juggernaut like AstraZeneca or GlaxoSmithKline. For the latter, you can buy active funds that specialise in this part of the market. Two of the most popular are Biotech Growth Trust (LSE: BIOG) and International Biotechnology Trust (LSE: IBT). 

Another option is to buy passive funds that focus on these themes. Like their active equivalents, these give instant diversification to holders by investing in a large number of stocks. And since they’re only out to track rather than beat indexes, the fees are a lot lower.

Examples include the iShares Healthcare Innovation UCITS ETF. The iShares Ageing Population UCITS ETF, which gives exposure to companies providing products and services to those in their golden years (many of which will be healthcare-related), is also worth considering. Both funds have ongoing charges of just 0.4%. 

Bottom line

A punt on coronavirus-related penny stocks might make you rich but there’s a very real chance it will go wrong. If you’re tempted, I’d suggest only using money you can afford to lose. Put the majority of your capital to work in far less risky options. 

The post Forget coronavirus penny stocks! I think there’s an easier way to get rich appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

From a contrarian perspective, airline stocks definitely look interesting. There’s certainly a chance these stocks could rebound. However, if you invest in airlines now, you’re taking on a fair bit of risk. What if travel doesn’t return to normal for years? Will these companies be able to survive in their current form? With so much uncertainty due to Covid-19, a near-term rebound is not guaranteed.

In my view, investors are better off investing in sectors that are holding up well in the current environment and will continue to hold up well if economic conditions deteriorate further. With that in mind, here are my three preferred sectors of the FTSE 100 to invest in right now.

A defensive sector  

The first sector I like in the current environment is healthcare. And not just because it’s leading the fight against Covid-19.

What I like about healthcare is that it’s a defensive sector. People still buy medication and have operations when the economy is contracting.

I also like the long-term growth story associated with the sector. The world’s ageing population, rising emerging market wealth, and the increasing prevalence of major health issues are dominant structural forces that should provide tailwinds in the years ahead.

There are some excellent healthcare stocks in the FTSE 100. Smith & Nephew, GlaxoSmithKline, and Hikma are some of my favourites. I think these kinds of stocks offer a favourable risk/reward proposition at present.

Resilience in a downturn 

Another sector of the FTSE 100 I like right now is consumer goods.

The reason I like consumer goods is that companies in this sector tend to be very resilient because they sell everyday products that people can’t do without. 

It’s also worth pointing out that consumer goods companies that focus on cleaning products are benefiting from the increasing focus on hygiene. Reckitt Benckiser is a good example. Sales of its cleaning goods (Dettol, Lysol) are flying right now.

Consumer goods firms may not be the most exciting companies, however, they tend to be solid investments. Like healthcare stocks, they can provide you with portfolio protection.

My top FTSE 100 sector 

Finally, my top FTSE 100 sector remains technology. I’ve been bullish on the tech sector for a while now, but the disruption we’ve all experienced from Covid-19 has amplified my bullishness. As the world has been forced to go into shutdown mode in the last few months, it’s tech companies that have really shone.

Some areas of technology that are booming right now include:

• Online shopping 

• Remote working technology

• Video communications

• Cybersecurity

• Video gaming

Going forward, I expect the technology industry to continue powering ahead. Covid-19 is likely to leave a lasting impression on consumer behaviour, and technology is likely to benefit.

The FTSE 100 isn’t known for its technology prowess. It doesn’t have stocks like Apple, which is listed in the US.

However, there are plenty of companies in the FTSE 100 that have technology at their core. Sage, Rightmove, and Hargreaves Lansdown are good examples.

I think these kinds of companies are going to be the real winners in the years ahead as the world becomes more digital.

The post Forget airline stocks. Here are the 3 sectors of the FTSE 100 I’d be investing in now appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Edward Sheldon owns shares in Smith & Nephew, GlaxoSmithKline, Reckitt Benckiser, Sage, Rightmove, Hargreaves Lansdown, and Apple. The Motley Fool UK owns shares of and has recommended Apple and GlaxoSmithKline. The Motley Fool UK has recommended Hargreaves Lansdown, Hikma Pharmaceuticals, Rightmove, and Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In terms of healthcare stocks, British investors have many options. Whether you’re looking to invest in a large-cap FTSE 100 healthcare stock, or an under-the-radar small-cap healthcare stock, there are plenty of investment opportunities. With that in mind, here’s a look at some UK healthcare stocks I believe could be worth checking out if you want to invest in healthcare.

Large-cap healthcare stocks

In the large-cap area of the market (the FTSE 100), there are a number of prominent healthcare stocks. The largest is AstraZeneca. It’s a global, science-led biopharmaceutical company. It specialises in oncology (cancer), cardiovascular and metabolic diseases, and respiratory, inflammation and autoimmune diseases.

Then there’s GlaxoSmithKline. Its area of specialism is pharmaceuticals, vaccines, and consumer healthcare products. Recently, GSK reached an agreement with Pfizer to combine their consumer health businesses. The combined entity will be a market leader in pain relief, digestive health, and therapeutic oral health.

Also in the FTSE 100, there’s Smith & Nephew. It specialises in joint replacement systems and looks set to benefit from the world’s ageing population. And then there’s Hikma Pharmaceuticals, which manufactures branded and non-branded generic medicines.

Mid-caps

In the mid-cap space, there’s a handful of healthcare stocks that could be worth a closer look. One of the larger mid-caps is ConvaTec. It offers products and services in the areas of wound and skincare, ostomy care, continence, and critical care.

Another largish mid-cap healthcare stock is Mediclinic. It’s an international hospital group with operations in a number of companies across the world. Also in the mid-cap area, there’s UDG Healthcare. It provides advisory, communication, and packaging services to the healthcare industry.

Small-caps

In the small-cap area of the market, there are many options if you’re looking for healthcare stocks. I’ll point out, however, that some of these stocks are more speculative in nature. So a cautious approach is sensible.

One small-cap healthcare company that appears to have potential is EMIS. It provides software and information technology services to the healthcare industry. This means it’s a play on both health and technology.

Another smaller company that looks interesting in my opinion is Advanced Medical Solutions. Its area of focus is advanced wound care products and surgical dressings.

There’s also Alliance Pharma, which owns or licenses the rights to over 90 pharmaceutical and consumer healthcare products. It has grown significantly in recent years.

Some other small-cap stocks that could be worth a closer look include clinical trials company Ergomed, antibody specialist Bioventix, and radiology business Medica.

In conclusion, there are many different healthcare stocks listed in the UK. This means that there are plenty of ways to gain exposure to the sector. The key, as always, is to do your own research and diversify your capital across a few companies. This will give you the best chance of profiting from the sector in the long run.

The post Want to invest in UK healthcare stocks? Here are some companies I’d look at appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Edward Sheldon owns shares in GlaxoSmithKline and Smith & Nephew. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Advanced Medical Solutions, Alliance Pharma, AstraZeneca, Bioventix, Emis Group, Hikma Pharmaceuticals, and UDG Healthcare. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With that in mind, here’s a look at one Brexit-proof FTSE 100 dividend stock I’m interested in buying for my ISA this year and watching closely right now.

Global healthcare

Smith & Nephew (LSE: SN) is a leading healthcare company that specialises in joint replacement systems for knees, hips, and shoulders. It operates in 100 countries and generates a large proportion of its revenues from the US and emerging markets, meaning that it should be well insulated from any Brexit-related economic downturn.

There are a number of reasons I like the look of Smith & Nephew and I am keen to add it to my portfolio. For starters, the stock looks set to benefit from an extremely powerful trend – the world’s ageing population. According to data from United Nations, the number of people aged 60 or over across the world is set to double by 2050. This should provide significant tailwinds for the group in the years ahead as demand for joint replacements rises.

The group’s emerging markets exposure (17% of revenue) is another plus. When a country experiences a rise in wealth, one of the first things you often see is a corresponding rise in demand for healthcare. With wealth set to rise significantly in countries such as China and India over the coming decades, Smith & Nephew should benefit.

Technological advances

The FTSE 100 stock also looks quite exciting from a technological perspective, in my opinion. Just a few weeks ago, the group announced that it was “making a long-term commitment to bring together advanced technologies in robotics, digital surgery, and machine learning as well as augmented reality to empower surgeons and improve clinical outcomes.”

As I mentioned recently, robotics has come a long way in recent years and what robots can do these days is quite amazing. The fact that Smith and Nephew is currently working on a handheld robotic surgical system that is designed to “improve the surgeon experience” is certainly a positive development.

Dividend legend

Finally, Smith & Nephew is a legendary dividend stock, as the group has paid a dividend every year since 1937. Dividend coverage is high too, meaning the chances of a cut in the near term are low. Currently, the yield is around 2%.

The shares have had a good run over the last year and currently trade on a forward-looking P/E of 19.7. While I don’t think that’s outrageously expensive for a high-quality dividend stock with a lot of potential, I would prefer to pay a slightly lower price. So for now, patience is required. I’ll be looking to buy this stock during the next market pullback.

The post A ‘Brexit-proof’ FTSE 100 dividend stock I want to buy for my ISA this year appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

One such stock is Mediclinic International (LSE: MDC). The £4.6bn market cap healthcare provider has released a full-year trading update today and its shares have jumped 5%. Let’s take a closer look at the company to see if the shares are worth buying.

Business description

Mediclinic is an international private healthcare group with operations in South Africa, Namibia, Switzerland and the United Arab Emirates. It also holds a 30% interest in UK specialist Spire Healthcare Group. The group is focused on providing acute care, specialist-oriented, multidisciplinary healthcare services.

It has experienced a challenging couple of years as lower patient volumes and expansion costs have weighed on profits. Investors have also been concerned with the group’s large debt pile. As a result, the shares have declined from over 1,100p back in August 2016 to just 655p today.

Yet today’s trading update sounded positive. The company appears to be moving in the right direction. Could a turnaround be on the cards?

Today’s update

Mediclinic advised this morning that the group expects to deliver adjusted financial results for the year that are “marginally ahead” of expectations, with a “significant second-half improvement” from the Middle East division. FY2018 revenue is expected to rise 2% in constant currency terms, while adjusted earnings are anticipated to be broadly flat on the prior year.

The group stated that its Middle East division is now entering an “expansionary phase” that is expected to drive a strong increase in revenue and improvements in margins over time. Furthermore, the Southern Africa division delivered second-half revenue growth ahead of expectations while in Switzerland, the Hirslanden division performed in line with expectations. Both of these divisions benefitted from cost-saving programmes and productivity initiatives implemented during the year.

CEO Danie Meintjes was upbeat in his outlook for the company, stating that the demand for healthcare continues to increase and that Mediclinic is well positioned to benefit and create long-term shareholder value.

Worth buying?

The long-term story here does sound appealing. And it appears that the company is now heading in the right direction after a challenging few years.

However, I’m not 100% convinced that the shares offer much value right now. The group expects earnings for the year to be approximately 30p per share. At the current share price, that places the stock on a relatively high trailing P/E of 21.8. For FY2019, analysts expect EPS of 32.4, which results in a forward-looking P/E of 20.2. The trailing dividend yield on the stock is low, at around 1.3%. Comparing these figures to those of other healthcare stocks in the FTSE 100, I think there are better stocks to buy at present. I’d pick up Glaxo or Smith & Nephew before Mediclinic International.

The post Mediclinic International: a top FTSE 100 healthcare stock? appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Edward Sheldon owns shares in GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But with no signs of spending slowing down in the US, UK or anywhere else, investors looking to benefit from this trend will find plenty of potential opportunities. One that I’ve got my eye on is UDG Healthcare (LSE: UDG), which is a provider of non-core services such as commercial marketing, packaging and communications for global drug makers.

UDG has benefited from these customers moving to outsource these essential but non-core services as a means of improving margins under relentless shareholder pressure. This trend, together with a slew of acquisitions that have turned it into a global leader in its markets, has sent the group’s share price up 25% over the past year alone.

Judging by the company’s Q1 trading update released this morning, investors have been right to be bullish as management is guiding for a whopping 18%-21% uplift in earnings per share for the full year to October. The group’s commercialisation division, Ashfield, is the main driver of growth and management said its operating profits were significantly ahead of the prior year’s due to acquisitions and organic growth as drug makers continue to bring huge volumes of new treatments to market.

While there were short-term issues with the packaging division, management expects these to reverse in H2 which, alongside falling US tax rates and growth in other divisions, should still leave investors very happy for the full year. With industry tailwinds at its back, a healthy balance sheet providing ammunition for further acquisitions, and massive growth opportunities, I think UDG Healthcare is still attractively valued even at 25 times forward earnings.

Underpinning critical research the world over  

Another healthcare stock on my radar is research tool provider Abcam (LSE: ABC). It provides academic pharma and biotech laboratories with research-grade antibodies that they need to conduct experiments.

This proposition has proven very attractive to scientists in recent years and as a result, Abcam has been growing very rapidly. In H1 alone revenue was 10% ahead of the year prior as each of its product categories grew sales faster than overall market growth.

Future growth opportunities also exist in broadening the group’s geographic reach, particularly in the massive Chinese market. Last year China accounted for only 13% of group revenue, but the country is becoming increasingly important with sales in the region up 24% year-on-year in H1.

There’s also the possibility of organic growth continuing to be buttressed by selective acquisitions that are well within the group’s capabilities. At year-end it had a pile of cash totalling £84.8m. And closing cash balances were well ahead of the year prior due to the highly profitable nature of the company’s business, with EBITDA margins of 32.5% recorded last year.

Abcam’s shares aren’t cheap at 39 times forward earnings, but with significant cash generation, impressive margins and continued double-digit sales growth, I think the business is still one I’d love to own for the long term.

The post 2 top healthcare stocks I’d buy right now appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Private equity

Private equity has been one of the best-performing alternative asset classes in recent years, and that’s helped to attract billions in flows from sovereign wealth funds, pension companies and other institutions. It’s an area that’s largely closed off to direct retail investors, but there are a few investment companies, such as the HarbourVest Global Private Equity Limited (LSE: HVPE), which give them indirect access to this market.

What’s unique about private equity funds is that they typically invest in unquoted companies that are in the developing stage or have under-tapped potential. This means there’s the potential to generate higher returns than in the stock market, while improving portfolio diversification at the same time.

HarbourVest invests in a wide range of private equity funds which, in turn, gives it exposure to a broad-ranging portfolio of equity investments diversified by geography, stage of investment, vintage year, and industry.

And with a share price of 1,290p, HarbourVest trades at a 15% discount to its NAV, meaning prospective investors can effectively purchase shares in the fund for significantly less than the sum of its parts.

A healthcare fund poised for growth

Sector investing offers targeted exposure to company stocks in individual industries which can help you to pursue opportunities which affect specific parts of the economy.

One sector which I’m particularly keen on is healthcare. The sector offers huge potential, as it benefits from a number of long-term structural tailwinds, which include an ageing global population, a growing middle class in emerging markets, and innovation in new drug development. Of course, not every company will perform well in a sector that is benefiting from long-term trends, which means it’s important to diversify and spread your capital over a reasonable number of companies.

But instead of just buying the likes of GlaxoSmithKline and AstraZeneca, why not diversify geographically to potentially boost returns and reduce risk? After all, healthcare is a global business, so you’re getting foreign exposure from domestically-based businesses anyway. What’s more, the US has many more publicly-listed healthcare companies than the UK, particularly in the biotech sector, which means avoiding international companies drastically narrowing your investment universe.

That’s why most funds investing in the healthcare sector typically have a global outlook. And one fund which has caught my eye recently is the Worldwide Healthcare Trust (LSE: WWH), which I reckon to be a smart bet on the sector.

Since its inception in 1995, the fund has proven leadership, having been continuously run by two specialist investment veterans, Samuel Isaly and Sven Borho. Performance figures for the past five years show the trust earns a total share price return of 211%, easily beating its benchmark MSCI World Health Care Index’s performance of just 131% over the same period.

The post 2 top-performing investment trusts for long-term investors appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Yet the company’s financial results for FY17 deserve our attention. Revenues grew 31% to £7.2m, with profit before tax up 37% to £5.7m. 

Its most significant revenue stream is from a vitamin D antibody called vitD3.5H10 (catchy, I know). Used by companies around the world in vitamin D deficiency testing, it accounts for around 40% of revenues. Sales of this crucial product increased 24% in the last year, but the company is expecting pricing pressure to dampen returns from this profitable source over time. 

This, combined with the loss of a technology license worth £1m, likely explains the market’s lukewarm response to today’s results. 

Magnificent margins

The company is valued at £136m, or 28 times last year’s earnings, so I’m not surprised that the uncertainty of surrounding vitamin D antibodies and the loss of the license have hit the shares to the tune of 4.5%. 

Still, with eye-watering 79% operating margins, I can understand why many are willing to pay up for the shares. If profitability can be maintained, it won’t take much revenue growth before the shares look reasonably priced. That said, the company does not own patents on all of its products and I fear pricing pressure could increase as others grow envious of its incredible margins.

Unless you have an extensive scientific background, an investment in Bioventix will always have a speculative element to it – and I’m no scientist. Therefore, I won’t be making an investment at today’s prices, but I can understand why others would.

If you are considering a purchase, I’d suggest you do your homework and size your position accordingly. If Bioventix can hold margins steady and keep growing, it could be one of the best investments on AIM. 

Another medical play

Advanced Medical Solutions (LSE: AMS) is another cash-generative healthcare stock that I believe has a good chance of making its investors rich. The company is a leader in the wound care and wound closure niches, supplying the NHS and other healthcare providers with bandages, sutures and the like. 

Its Liquiband glue-gun range is the dominant brand in A&E across the UK and Europe. The impressive product range, which outperforms other healthcare solutions, helped the company earn a 25% operating margin in the first half of this year. 

I believe its patented range of products can continue to grow revenues in the US, where Liquiband increased its market share by 4% to 24% over the last year. 

At last count, the company boasted a £55m net cash position which makes the PE of 38 a little more palatable. Still, at these prices I’d expect the business to grow sales faster than the 8% constant currency increase on show in the first half. Reported revenue growth was 20%, so I fear the shares could be knocked by a strengthening of sterling. 

For now, the shares occupy a place on my watch list. 

The post Should you buy this growth company after profits soar 40%? appeared first on The Motley Fool UK.

More reading

• How to turn a Stocks and Shares ISA into £10k of annual passive income
• 3 useful lessons from Warren Buffett for an investor over 40
• This UK growth share’s already doubled this year. I reckon it might just be getting going!
• How much do I need in an ISA for a £668 monthly second income?
• In just 2 years, Vodafone shares would have turned £10,000 into this much…

Zach Coffell has position in any shares mentioned. The Motley Fool UK has recommended Advanced Medical Solutions. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.