Combining innovation and smart acquisitions
Discovery is a top holding in my portfolio in terms of expectations. If the company manages to succeed on all fronts, it’s a blend of Capitec* and Naspers**. It’s like Capitec because it is innovative in a boring industry – Discovery started in health but is moving into the financial/insurance space. Naspers got lucky with Tencent, and similarly Discovery may strike it big with its stake in Ping An Health. The Chinese insurance company is showing double-digit growth, albeit off a low base, as that country changes its healthcare process as it becomes more of a consumer nation.
Recent results show that the company is making a decent profit. Vitality continues to expand, as does the overall offering, with its banking division expected to launch in 2018. Discovery continues to spend large amounts on innovation which, while dampening earnings for now, should pay off in the future.
As always, there are risks. Health and financial services are also tightly regulated (both a benefit and a challenge) and not easy to break into. But thus far management has proven itself and I am happy to buy below R156.
*The writer owns shares in Discovery and Capitec.
**finweek is a publication of Media24, a subsidiary of Naspers.