Could Covid booster shot revive your ailing funds?
SHREWD savers are reviving their portfolios — despite the pandemic leaving the markets in bad health — by investing in the medical firms leading the hunt for a coronavirus vaccine. There are now more than 100 vaccine research programmes under way, and 20 drugs in development — and British companies active in testing, including Novacyte and Avacta, have seen their shares rocket.
However, Rob Burgeman, investment manager at wealth management firm Brewin Dolphin, warns that with so many companies racing to be first to find a fix, many will end up spending money for no actual benefit. He says: ‘Vaccine research has more than a little in common with oil exploration. So, it is important investors either go big by focusing on the large companies or go broad by choosing strong, wide-ranging pharmaceutical funds.’
Mr Burgeman’s stock picks among the pharmaceutical giants are AstraZeneca and Novartis. AstraZeneca shares, says Burgeman, are not cheap, currently at £79.63, but the Cambridge-based company is at the forefront of finding a cure. If you had invested £10,000 in the company’s stock at the start of the year, it would now be worth £10,388. The firm also offers a dividend yield of around 2.76 pc.
The same investment in Swiss pharmaceutical giant Novartis would now be worth £8,786 after a 12 pc fall in its shares’ value. To Mr Burgeman this offers an opportunity as the ‘first class’ firm’s shares are now undervalued.
Investors who do not want to pin their hopes on the fortune of a single company, can spread their risk by investing in broad health care funds or investment trusts.
Mr Burgeman recommends two so- called exchange traded funds (ETFs) — investment funds that can be bought and sold on a stock exchange, except they contain a range of company shares.
SPDR World Health Care ETF consists of a basket of 145 global healthcare stocks, many of which are involved with Covid research.
Around 50 pc of the fund is invested in the U. S. while the rest is spread globally. A £10,000 investment on January 1, would now be worth £10,391.
The iShares Healthcare Innovation ETF includes a broad range of companies focused on pushing the boundaries in medical technology and treatment. Investors have enjoyed a 30 pc return so far this year. A £10,000 investment in January would now be worth £12,983.
Investment companies, or trusts, in the biotechnology and healthcare sector are up 15 pc on the whole, since the start of the year.
Annabel Brodie-Smith, communications director of the Association of Investment Companies, says: ‘The demand for treatments to combat Covid has been a contributor but there are wider themes underpinning the sector’s growth, too.
‘Biotechnology and healthcare businesses are working on cuttingedge treatments for diseases such as Alzheimer’s and Cystic Fibrosis and developing new ways of providing healthcare to lower the cost for ageing societies.’
Yet the value of British pharmaceutical giant GlaxoSmith-Kline is down by nearly a quarter, despite its work on a vaccine.
The firm has said its business has been negatively affected by Covid-19 because patients have been reluctant to go to their doctor for usual medical treatments.
Russ Mould, investment director at broker AJ Bell, says: ‘This should prove to be a temporary phenomenon, but it is holding back the shares and this shows that investors who are looking for a way to find a Covid-19 vaccine winner need to spread their exposure and not rely on just one or two specialists.’