Discretionary Investment Management | Ravenscroft Group | Georgie Fletcher
12 Oct 20
Weekly update: Healthcare and technology – global trends, now and for the future
This week’s update comes from Georgie Fletcher who is in our discretionary investment management team in Guernsey.
As readers familiar with Ravenscroft’s discretionary investment process will know, we believe the irrefutable global trends which are at the core of how we invest are shaping our societies, cities and the very world around us.
Improvements in nutritional science and healthcare have driven life expectancy across the globe to new highs and, as a result, our population and consumption is growing voraciously as people aspire to improve their lives. We’re also now better at curing illness than ever before; combining this with reducing birth rates in wealthy countries means that right now a higher percentage of us are enjoying our golden years than ever before. We are equally living in a world where, try as we might, it is impossible to escape technology and its advancement across the globe. Technology has enabled us to stay connected for longer, improved our communication whilst all the while making our lives more fun. We believe that increasing wealth, changing demographics and technological innovation are undeniable global phenomenons that will stand the test of time and still be around in many years to come.
A thematic fund held within our Growth strategy*, which provides exposure to all of these trends, is Pictet Global Environmental Opportunities (Pictet GEO). We thought in this weekly update, we would look at why that was and dive deeper into a couple of the portfolio’s new entries.
Pictet GEO focuses on sustainability and scarcity of resources, essentially investing in companies that are active throughout the environmental value chain. The team believes environmental issues are now a matter of global importance and companies that provide effective products and services which increase resource efficiency and minimise pollution are well placed to grow strongly. By investing in these firms, they hope to make a positive contribution towards a more sustainable world, as well as generating attractive capital gains.
We had a call with the Pictet GEO team on Friday as part of our ongoing engagement and monitoring process. Ordinarily this would have been a face-to-face meeting in London, however as the case has been with all of our fund managers since the pandemic hit, the call was held by video conference.
The pandemic has certainly brought its fair share of logistical struggles for us, our fund managers and their teams, however it’s also been a particularly fruitful time for many of the funds within our discretionary strategies and Pictet GEO is certainly no exception.
Earlier this year, the Pictet GEO team initiated new positions in working from home (WFH) software providers, TeamViewer and Citrix; these stocks form part of a long-term theme of WFH which sits within the Dematerialised Economy portion of its portfolio (i.e. companies that help use less raw materials or physical things but still enable consumer demands to be met). Zoom is included in this and fits in its framework - the team had actually looked at the business in the past, but it didn’t make the cut on the valuation angle. Nevertheless, what we particularly liked about Pictet GEO’s decision to introduce TeamViewer and Citrix into its portfolio is that it was looking at these businesses in a pre-Covid world; it had existing relationships with the companies and had been monitoring them since 2019.
The pandemic has emphasised the importance for businesses having access to platforms that enable WFH and has been reflected in the share prices of TeamViewer and Citrix which are up year-to-date. The fact the team identified this theme prior to the pandemic shows the quality of its investment process; managers who are in front of the curve are the places we want to be invested in.
Elsewhere within the Dematerialised Economy portion of its portfolio, the Pictet GEO team also looks at telemedicine names such as Teledoc and Amwell. Telemedicine is not new but it has improved significantly with a number of secure platforms now available which provide high quality images and connectivity and make an online consultation comparable to a face to face appointment. Pictet GEO kept an eye on Teledoc during the early stages of the business; prior to coronavirus Teledoc accounted for c.1% of doctors’ visits in a year and now 50% of one billion visits could happen over Teledoc. If you consider that half of those patients might stick in the long run, that makes telemedicine a very exciting area. Telemedicine already had huge potential which has been intensified by the pandemic and there is no doubt that this past year will have accelerated its growth as an integral part of our healthcare systems.
While Pictet GEO continues to monitor Teledoc, it has added its competitor Amwell to the portfolio. Amwell provides virtual doctor’s consultations and caters for various needs from urgent care to tele-psychiatry. With rumours of UnitedHealth, the US healthcare giant, potentially acquiring Amwell, combined with the rise in usage due to the pandemic, it is not surprising that Amwell has enjoyed a 94% increase in performance since September.
Pictet GEO focuses on owning quality and does not compromise on valuations and this has been reflected in the Fund’s performance (up 22.2% year-to-date). Its investible universe will continue to expand to include new technologies and innovations. Pictet GEO believes it is a very positive sign that there is so much it would like to own; it has its lines in the sand in terms of valuations and feels that opportunities will appear – it just needs to be patient. Over the next three to seven years we see the sustainable investment theme getting even stronger and companies that play an active role in making the economy more efficient, more digital and less resource intensive are likely to grow very quickly. The Pictet GEO Fund is best placed to select the most attractive of these solutions by investing in businesses that can weather a difficult economy and also perform well during the recovery phase. We continue to be happy long-term holders of the Fund.
* The growth strategy is an equity-focused, mixed asset strategy run by Ravenscroft’s discretionary management team. It is available in various forms across our jurisdictions. Please contact your local Ravenscroft office for more information who will be able to confirm what options are available to you.