I see interesting times ahead for the GSK (LSE: GSK) share price. GlaxoSmithKline is one of the largest UK biotech stocks trading on the London Stock Exchange. It’s a global giant, with an impressive £1.7bn free cash flow in Q1 alone.

But its share price has been losing ground against its competitors, barely moving over the last five years. It’s not even kept up with inflation.

Could that be about to change as it goes through what it describes as “the most significant corporate change for GSK in the last 20 years”?

Change ahead for the GSK share price?

For some time, the company has been seen to be lagging behind its peers. The last decade has seen it fall from being the third-largest pharmaceutical company in the world down to 14th, based on its market cap.

CEO Emma Walmsley’s response has been the slow progression of plans to split the company in two. And next month should finally see the spin-off of its Consumer Healthcare division into a separate company called Haleon.

But will the estimated £2.4bn cost of the split, one of the most expensive ever, be worth it?

Can GSK benefit from the deal?

The deal will give the company a one-off pocketful of £7bn in cash to spend. That’s seen as fundamental for developing its drugs pipeline, especially in areas such as cancer where it’s noticeably lagging competitors.

This is something that should have a positive impact on its share price. But that’s only if it’s able to transform itself from a global giant into the nimble biotech-focused company it says it wants to be.

In particular, it wants its R&D teams to focus on the science of the immune system, use of human genetics and advanced technologies.

That all sounds wonderful and exciting on paper – but I’m politely curious (read a little sceptical) as to whether reality will match its ambitions. 

Can the ‘new’ GSK compete in the biotech world?

With the pandemic bringing vaccine development sharply into the limelight and increased competition, it’s probably fair to say the biotech world is a tougher place to win these days.

The average business spend for companies developing new drugs may have fallen sharply from a high of $2.8bn to $1.3bn, but that’s still a huge chunk of cash to bet on a single product.

That’s why having a diverse pipeline of drugs is essential for GSK (just like my Foolish investing approach in shares). If one drug fails to perform as hoped, others may plug the revenue gap.

Right now, its focus appears to be on buying its way out of its pipeline problem, such as its recent £1.5bn purchase of Sierra Oncology. Or there’s the £2.1bn upfront payment to Affinivax, a clinical stage vaccine developer.

That’s an expensive approach and not one I’d be keen on seeing it adopt as its main strategy.

The market may well want to see tangible proof of its R&D investments paying off before it rewards GSK with a higher share price.

So to answer my question in the title, I don’t think the fact of the demerger alone will drive the price higher. For now, I’ll hold off on buying GSK shares. But I’ll watch with interest to see if it takes advantage of its post-demerger opportunities.

The post After its £2.4bn demerger, can the GSK share price blossom? appeared first on The Twelfth Magpie.

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Michelle Freeman holds shares in GlaxoSmthKline. The Motley Fool UK 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.

As a Fool keen to tap into long-term investment trends, I’m bullish on the outlook for the biotech sector. As such, I’ve been closely following the performance of the Oxford Nanopore (LSE: ONT) share price since the company’s highly successful IPO.

Should I be piling into the DNA-sequencer’s stock as soon as possible, or steering clear for now?

IPO success story

Based on trading to date, it’s easy to think the former. Such was the scale of demand, the Oxford Nanopore share price exploded to 645p from its initial IPO value of 425p on 30 September.

Clearly, its involvement in tracking variants of Covid-19 over the last year or so has done the firm’s profile no harm at all. However, early investors also seem to think its plans to move into the applied genomics market — including areas such as agriculture and food safety — could light more fires under ONT stock in time.

Like every potential investment however, it’s worth asking what can go wrong as much as what can go right. I see two potential issues. 

#1 Post IPO sell-off. Although the initial gains have been excellent, there’s no guarantee the Oxford Nanopore share price will continue to ascend, even if the company executes its plans perfectly. Regardless of quality, traders will routinely sell up once the buzz dies down. It’s worth noting that momentum’s already stalled a little. The stock changes hands for 577p, as I type.

# The growth is priced in. With the Oxford Nanopore share price charging ahead, the company quickly boasted a market capitalisation of £5bn after its IPO. Based on the growth potential, that’s not entirely irrational. However, this is still a nascent market and ONT only generated a little over £100m in revenue last year. It’s also unprofitable, and could be for years.

Safer bet?

Considering the above, I won’t be investing in ONT just yet. Instead, I’m content to keep adding to my holding in Biotech Growth Fund (LSE: BIOG). This may seem like a rather odd decision. After all, BIOG’s share price has declined 18% over the last 12 months. 

So, why BIOG over ONT?  Three reasons:

1# Safety in numbers. The Biotech Growth Trust has 87 holdings, based on its latest factsheet. Given the aforementioned volatility often seen in the sector, I reckon this diversification makes it considerably less risky than ONT.

2#Great track record. Despite performing poorly in 2021, BIOG has done admirably for investors over a longer time frame. Since September 2016 (and despite the recent sell-off), the share price has climbed 71%. If shares had been sold at the February peak, the gain would have been 145%.

3#Small-cap focus. BIOG’s preference for small-cap companies helps explain recent underperformance. Since these have the potential to grow at a far higher clip than established heavyweights, the longer-term gains should theoretically be very good indeed. What’s more, BIOG offers exposure to fast-paced players in emerging markets such as China.

Obviously, the share price could continue falling for now. Regardless of what happens in the global economy, it’s also worth noting that only a minority of biotech firms become profitable. Those relatively high ongoing fees (which holders of ONT won’t have) will need to be paid whatever happens.

As things stand though, BIOG will remain my sole biotech holding. Oxford Nanopore goes on the watchlist. I’ll reassess if/when the froth subsides.

The post The Oxford Nanopore share price soared at its IPO. Should I buy now or wait? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Biotech Growth Trust. 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.

None of this has stopped me from continuing to buy growth stocks for my own portfolio though.

Contrarian growth stock

After sitting on the sidelines for a while, I’ve finally grabbed the bull by the horns and snapped up shares of online holiday firm On the Beach (LSE: OTB).

Devoid of the high fixed costs endured by larger peers such as TUI, OTB’s flexible, online-only business model ensures it has minimal cash burn while travel restrictions remain in place. A recent £26m share placing also gives the company sufficient financial firepower for a big marketing push when rules are relaxed and demand for holidays explodes.

This isn’t to say that taking a position now is without risk. Those restrictions will likely be in place for a while yet. Moreover, the barriers to entry into this market aren’t particularly high.

Nevertheless, the progress of vaccination programmes leads me to think that the risk/reward trade-off is far better than it used to be. OTB’s share price is also down roughly 40% since March. This gives me what I feel to be a decent margin of safety. I’ll be continuing to drip-feed my money into this growth stock over the next few months. 

Buying the dip

I simply couldn’t finish July without adding to my stake in fast-fashion giant Boohoo (LSE: BOO). A bumpy ride over the last month, not helped by a poorly-received update from industry peer ASOS, looks to be another opportunity to acquire this growth stock at a great price.

The 20% fall in Boohoo’s value over the last six months leaves its shares changing hands for less than 26 times earnings. I think that could prove to be a steal once the company puts its ESG (Environmental, Social, Governance) concerns to bed. The negative publicity will hopefully lessen as BOO demonstrates what it’s done to put things right with its supply chain.

Sure, there are other potential headwinds. Confirmation of an online sales tax could send the shares lower, as might a simple lack of news over the next month. However, some knockout interim numbers in September may arrest this fall. Evidence that recent acquisitions are bearing fruit would provide another boost. 

Investing megatrend

My last buy this month has actually been an investment trust rather than a single company stock.

I began buying Biotech Growth Trust (LSE: BIOG) in April. Unfortunately, its shares have drifted lower since then. Reasons could include the ongoing rotation from growth stocks into those appearing to offer more value. There might also be a belief that healthcare-related funds have had their time in the sun.

Notwithstanding this, I’m confident BIOG’s managers — many of whom are medically trained — know what they’re doing. An annualised return of 17% over the last five years is far better than the trust’s benchmark. Then again, this has been at the expense of greater volatility, As such, those with weak stomachs need not apply.

Given the rate of technological progress, this area could be one of the investment themes for years. I think a diversified trust like BIOG is the best way to play it.

The post 3 UK growth stocks I’ve been buying in July appeared first on The Twelfth Magpie.

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Paul Summers owns shares in On The Beach, boohoo group and Biotech Growth Trust. The Motley Fool UK has recommended ASOS, On The Beach, and boohoo 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.

Small stocks, big rewards

My first buy has been a top-up to my holding in the Lionstrust UK Micro Cap fund. This aims to hold some of the best small company shares available and is managed by a team of highly experienced managers including Anthony Cross and Julian Fosh.

Thanks to their ability to grow revenue and profits far quicker than your average FTSE 100 juggernaut, minnows tend to generate better returns for investors over the long term. Launched back in September 2016, the 64-stock Liontrust fund had gained 133% by the end of March. This compares very well to the 85% achieved by its benchmark (IA UK Smaller Companies).

As good as this performance is, it’s important not to get carried away. Micro-cap stocks can be infinitely more volatile than their blue-chip equivalents. This may make them unsuitable for more mature investors nearing (or in) retirement. With hopefully many decades of investing left, however, I’m confident the Liontrust fund matches my own risk tolerance.

New entry

The first new addition to my Stocks and Shares ISA in April has been the Biotech Growth Fund (LSE:BIOG). As it sounds, this near-£600m trust invests in a diversified basket of companies in this space. These come from around the world but most (almost 75%) are based in the US. 

BIOG’s share price rose almost 68% over 2020. Like the Liontrust fund, this compares favourably to the 22% achieved by its benchmark (The NASDAQ Biotechnology Index). Although this may prove to be an exceptional year, I think the growing demand for diagnostics and therapeutics solutions for chronic diseases bodes well.

Of course, there’s the potential to make more money in individual biotech stocks. However, I’m fairly certain BIOG’s managers have a better idea than I do about which companies have the best growth prospects. The only snag is that this expertise doesn’t come cheap. BIOG has an ongoing charge of 1.1%.

Hot growth theme

It pays to catch an investment theme early and keep all profits from the taxman in a Stocks and Shares ISA. As such, my final purchase this month is a small opening position in the Medical Cannabis and Well Being ETF (LSE: CBDP).

Launched last year, this provides me with exposure to a concentrated bunch of companies involved in the medical cannabis, hemp, and cannabinoids industry. Its biggest holding is UK-based firm GW Pharmaceuticals. 

Naturally, CBDP is far from risk-free. In fact, it’ll likely prove to be the most volatile of all three funds mentioned. The medical cannabis industry is still very much in its infancy and still faces huge regulatory hurdles. The 0.8% total expense ratio isn’t cheap for a passive fund either. 

So, is this a punt? Not exactly. The chances of cannabis being legalised at a Federal level in the US received a shot in the arm following the election of Joe Biden. Should this happen, it could prove to be the catalyst for more investors to get involved. Naturally, the gradual approval of more treatments should also prove a tailwind for this ETF’s share price.

The post 3 UK funds I’ve been buying for my Stocks and Shares ISA appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Liontrust UK Micro Cap Fund, Biotech Growth Fund and the Medical Cannabis and Well Being ETF. 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.

Why is the stock surging? And should I add this company to my growth portfolio? Let’s take a look.

FTSE small-cap: a biotech stock with hidden potential

PureTech Health (LSE:PRTC) discovers, develops, and commercialises new treatments for diseases that affect the brain, immune system and gut.

A common problem with young biotech companies is finding the necessary funding to develop new medicines. After all, the process is long and expensive, with a high chance of failing to deliver a viable product. But this FTSE small-cap stock has found an intriguing solution.

The business comprises two pipelines. The first is called Wholly Owned, which, as the name suggests, develops new drugs entirely owned by PureTech. The second pipeline is where things get interesting, in my opinion.

It’s called Founded Entities and is essentially a portfolio of nine independent businesses of which PureTech is a major stakeholder. What’s more, some of these businesses, such as Karuna Therapeutics, are actually listed on the stock exchange themselves. So, whenever PureTech needs to raise additional capital to fund its own drug development, it can sell some of its shares.

Combining both pipelines, PureTech has 23 product candidates in its portfolio, 14 of which are already in clinical trial phases, with another two on the market today.

Drug development is risky

The biotech stock has an extensive portfolio of products in its pipelines. And while most have either entered or are entering clinical trial phases, there’s a considerable level of risk to consider.

Firstly, none of the drugs in its Wholly Owned pipeline have been FDA approved as they are mostly in phase 1 trials. And given that the typical drug development cycle lasts around 10 years, it could be some time before any of these products yield tangible returns. And that’s assuming they don’t fail along the way.

Today, the firm generates all of its profits from Founded Entities through stock sales and royalty income on two FDA-approved medicines. The remaining products are once again at various clinical trials stages, although there are two in their final phases.

The highly regulated nature of the drug development industry protects the health of patients. But it also makes it incredibly difficult to release new treatments. Even if a new medicine is approved, there’s still the chance that it won’t be economically viable. For example, PureTech’s new drugs may not be covered by health insurance policies or government health authorities.

The bottom line

This FTSE small-cap biotech stock undoubtedly has a significant level of risk attached to it, especially since the business is currently structured more like a holding company, as opposed to a regular biotech stock.

But over the long term, PureTech looks like a solid business in my eyes. It has a vast portfolio of potential products and is set to continue receiving royalties from treatments designed and developed by other firms. This is one biotech stock I’d add to my growth portfolio.

The post 1 FTSE small-cap biotech stock I’d buy now appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in PureTech Health. 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.

A new Covid-19 vaccine from AstraZeneca

The trial results were positive, but the AstraZeneca share price barely moved on the news. The muted response is likely attributable to the company’s ‘no profit’ policy for its vaccine launch. The vaccine, AZD1222, was tested using two separate dosing regimens.

The first dosing regimen consisted of a half then full dose one month apart and showed a 90% efficacy. Patients in the second dosing regimen received two full doses one month apart and showed a 62% efficacy. The combined results showed a 70% overall effectiveness.

While this would be considered a breakthrough a few months ago, in comparison to the 95% efficacy of Pfizer’s and Moderna’s vaccines, AZD1222 appears underwhelming. However, it has a distinct advantage over both.

The vaccines from Pfizer and Moderna require cold storage conditions of -70°C, and -20°C, respectively. AstraZeneca’s vaccine can be stored for up to six months at a temperature of 2°C–8°C.

Maintaining sub-freezing temperatures in transit is a complicated and expensive process, making the availability of the vaccine in poorer nations minimal. By not requiring less demanding storage temperatures, AZD1222 may prove to be the most viable vaccine candidate for mass distribution.

A biotech stock opportunity

The vaccine was developed and manufactured with help from Oxford Biomedica (LSE:OXB) as part of a supply agreement signed in September. I’ve discussed the biotech stock in previous articles. As a quick reminder, Oxford Biomedica is a gene and cell therapy group. It offers a proprietary platform, LentiVector, that allows pharmaceutical companies to develop new drugs at a significantly reduced cost.

The supply agreement is active for 18 months. The biotech company is responsible for the manufacturing of AZD1222 until the end of 2021 unless the contract is extended.

Initially, the firm received an upfront payment of £15m from AstraZeneca. It expects to generate an estimated £35m from this contract alone by the end of 2021. This represents a huge growth opportunity for the company. The combined £50m revenue represents nearly 80% of the total revenue achieved in 2019 pre-Covid-19.

With this added boost and the continual growth of its LentiVector platform, I’ve forecasted total revenue for 2021 to be in the £100m–£120m range – almost double what it is today.

However, it is essential to remember that this additional revenue is only temporary and may cease to exist after 2021. Still, it does grant a significant boost in available capital for the business to reinvest and increase the value of its platform for its clients.

The bottom line

AstraZeneca’s noble non-profit stance is a social victory. However, Oxford Biomedica is the real financial beneficiary of AZD1222’s successful trials. The Covid-19 vaccine still requires regulatory approval, but AstraZeneca has already begun the filing process with multiple regulatory bodies around the world.

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Zaven Boyrazian owns shares in Oxford Biomedica. 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.

This new approach to developing medicines from living organisms rather than chemical bases has allowed the pharmaceutical industry to make giant leaps. But its uses are not limited to just medicine. Biotechnology companies have developed pest-resistant crops, biofuels for vehicles, and even gene cloning.

This diverse range of applications and continual discoveries have created an enormous opportunity for these two biotech companies, in an industry expected to reach $500bn by 2026.

Oxford Biomedica – A hidden industry leader?

Oxford Biomedica (LSE:OXB) specialises in gene and cell therapy. This segment of the biotechnology sector is relatively new, with only eight FDA-approved treatments on the market today. However, by 2025 it’s expected that 10-20 new therapies will be approved — every year.

Why do I think Oxford Biomedica is a leader? It’s simple. Developing gene and cell therapies is a costly process that most pharmaceutical companies would deem too risky to pursue. However, this stock has developed a proprietary platform called LentiVector.

It allows Oxford Biomedica to utilise its expertise to assist large pharma companies in developing new drugs. The firm charges bioprocessing and development fees for clients using the platform. This approach to drug development is considerably cheaper for clients and subsequently reduces the investment risk.

Attracting the likes of Novartis and Bristol Myers Squibb, the platform has become a centre point for bio-drug development. What’s more, is even after completion and approval of a new treatment, Oxford Biomedica continue to receive royalties from each sale. Needless to say, this business model creates an incredible stream of recurring revenue and cash flow – a key requirement for explosive returns.

Bioventix – An industry diagnostics expert

Bioventix (LSE:BVXP) operates in a different segment of the industry. It designs and manufactures specialised antibodies for blood testing machines. Today blood tests are used to diagnose almost every disease — including Covid-19.

This continual rise in demand has drastically increased the price of antibodies. To put it in perspective, Bioventix currently sells between 10-20 grams each year at around £4m.

Currently, the supply does not meet the demand, and while this won’t be the case forever, it may not matter over the long term.

Just like Oxford Biomedica, Bioventix works directly with large pharma companies to sell or develop new antibody solutions. The firm also continues to receive royalties on each subsequent sale of a product designed with its antibodies. Almost 70% of the revenue stream originates from these multi-year royalty payments.

Growth stocks with a recipe for explosive returns?

With one business diagnosing the problems, and the other finding treatments, they capture a large portion of the industry pipeline. Combined, the companies amount to a $1.12bn market cap, thus there is a lot of room for growth.

I’ve owned shares in Oxford Biomedica for many years, and recently I’ve bought more. Bioventix is a far smaller company, but it’s looking ever-more promising in my eyes. Fused in one portfolio, I believe these biotech growth stocks have the potential to create explosive returns for myself and other shareholders.

The post I’d buy these 2 growth stocks for explosive returns! appeared first on The Twelfth Magpie.

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Zaven Boyrazian owns shares in Oxford Biomedica. The Motley Fool UK has recommended Bioventix. 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.

The opportunity 

Bioventix (LSE:BVXP) is a biotechnology company that specialises in manufacturing antibodies for blood testing machines. Hospitals around the world use its products to help diagnose heart disease, thyroid problems, fertility issues, cancer, and a plethora of infectious diseases.

Unlike other antibody creation labs, Bioventix uses a proprietary sheep monoclonal antibody (SMA) technology that far out-performs the competition.

The business has two revenue streams.

The first is the manufacture and distribution of its SMAs to in vitro diagnostics (IVD) companies around the world – such as Roche Diagnostics, Siemens Healthineers, and Abbott Diagnostics.

Currently, the company sells around 10–20 grams of the purified antibodies each year. Needless to say, it’s an expensive material.

The second source of revenue is from royalties. Whenever a client sells a diagnostic product that uses SMAs to their downstream customers, Bioventix receives a modest royalty. As it stands, these agreements generate approximately 70% of the company’s annual revenue.

This unique approach to business results in an ongoing source of money from its clients, after the sale of the product.

It also partakes in contract antibody creation programmes. Other companies pay Bioventix to develop a new antibody for exclusive use. The process typically takes one year. Once completed, the firm once again continues to receive royalties from each sale.

The financials 

The latest results from June 2020 revealed continued revenue growth of 11%. At first glance, this appears to be a slow-down from previous years. However, Covid-19 did cause disruptions to the routine of the global IVD market that resulted in a 15%–20% reduction in activity.

A diverse portfolio of antibodies drives the royalty revenue. Although, it is worth noting that the royalty agreement for NT-proBNP, which currently represents 13% of annual revenue, is set to expire in July 2021.

There are plenty of other products generating royalties ready to replace it. However, the loss of income may have a notable impact on 2022 annual revenue.

One of the best shares to buy now?

The highly regulated pharmaceutical industry is both a blessing and a curse. Regulators have already approved the SMAs, but not the products of its clients. Seeking approval is a very lengthy process that can take up to a decade of tests and trials.

This delays the royalties Bioventix is set to receive from its contract antibody creation programmes. To put this into perspective, the projects being developed today likely won’t yield royalty revenue until 2025–2035.

On the plus side, the long and expensive path to approval grants a significant competitive advantage. The process creates a large barrier to entry for competitors as they would have to pursue regulatory approval themselves. 

In my opinion, this form of competitive edge is a rare to come by. Whether they are the best shares to buy now is a personal decision, but Bioventix is definitely on my list as a possible addition to my portfolio.

The post Looking for shares to buy now? 1 biotech stock I’d buy today appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Bioventix. The Motley Fool UK has recommended Bioventix. 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.

There are a number of investment trusts that offer an attractive combination of both dividend income and capital growth. This is because following a rule change in 2012, UK investment trusts now have the ability to pay dividends out of capital profits. This means that they can invest in traditionally lower-yielding sectors, which may offer better than average growth prospects, and meet shareholder demand for income in the current rate environment.

UK smaller companies

One option is the Invesco Perpetual UK Smaller Companies Investment Trust (LSE: IPU). Aside from its dividend yield of 4%, this fund is a classic equity investment trust that holds a diversified portfolio of small to medium-sized UK quoted companies.

Unlike equity income funds, which invest primarily in higher-yielding stocks, this fund does not prioritise higher-yielding companies over lower-yielding ones. Instead, it remains focused on identifying what the managers regard as quality businesses with strong balance sheets.

But following a change in its dividend policy in 2014, it has used its capital reserves to supplement its dividend payments, in order to enhance its dividend yield. As such, the income earned by the portfolio in the form of dividends affords just roughly half of the investment trust’s yield.

Top performer

The fund is a top performer in the small-cap equity space and has been consistently beating the performance of its benchmark in recent years. It has a five-year total return of 50%, which compares favourably to the benchmark Numis Smaller Companies ex-Investment Companies Index’s gain of 28% over the same period.

Industrials is its biggest sector exposure, representing 33% of its total assets, and this is followed by consumer services, which accounts for a further 19%. The top five holdings in its portfolio include Coats, Clinigen, Consort Medical, Robert Walters and 4imprint.

Biotechnology

The biotechnology sector has been one of the hottest investment areas over the past decade, and many stocks have delivered incredible profits for investors. However, it’s an equity space which offers very low yields, with very many companies not offering any dividends whatsoever.

The International Biotechnology Trust (LSE: IBT) is one way to get around this issue. This investment trust offers a current yield of 4.1%, via the use of capital reserves to top up its dividends.

Unsurprisingly, its past performance is impressive. Over one-, three- and five-year periods, the biotech fund has returned 14%, 25% and 170%, respectively. However, past performance is no guarantee of future returns and it’s important to consider other factors as well.

Currency risk

Investors should also be wary about the impact of currency fluctuations on capital values. As US large-caps dominate its portfolio, and the underlying firms earn most of their revenues outside of the UK, the fall in the value of the pound in recent months has boosted the sterling valuation of its underlying investments.

Should the pound recover from such lows — perhaps from progress on Brexit negotiations, then the rise in the value of the pound would hurt capital growth in the future.

The post Have £1,000 to invest? Consider these high-yield investment trusts for both dividends and growth appeared first on The Twelfth Magpie.

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Jack Tang 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.

For investors looking for growth and income from smaller companies, I reckon the Acorn Income Fund (LSE: AIF) deserves a closer look. The fund is a standout performer in the UK small-cap space, boasting some of the best figures across the board.

An investor who had bought shares in the investment trust five years ago would have earned a total return of 176%, a significantly better performance than the FTSE SmallCap (excluding investment companies) benchmark’s total return of 112%.

The Acorn Income Fund invests 70-80% of its overall portfolio in UK-listed smaller companies, with the remainder in fixed interest securities. Equity fund managers Simon Moon and Fraser Mackersie use a bottom-up investing approach, picking companies with experienced and well motivated management, good cash generation, and growing dividends.

Top holdings in the smaller companies portion of the portfolio include Convivality (4.2%), Acal (3.7%), Clipper Logistics Group (3.7%), FDM (3.1%) and Somero Enterprises (3.0%).

Reduce capital risk

The inclusion of bonds in the fund helps to add income and reduce downside risk in an otherwise risky basket of small-cap stocks. Paul Smith, who manages the income portion of the portfolio, invests mainly in short-to-medium duration securities, which reflects his concerns on tightening monetary policy. He also hedges against potentially rising rates by holding short positions in government bond futures to reduce the average duration of the portfolio.

The Acorn Income Fund is attractively valued on its current discount of 6% on net asset value, which means investors can effectively purchase shares for less than the sum of its parts. Additionally, with its yield of 4.1%, the fund is also one of the most attractive from an income standpoint.

Biotech stocks

Biotech stocks have been one of the hottest investment areas in recent years as promising new drug developments and robust earnings growth lure investors to the sector. With this in mind, the International Biotechnology Trust (LSE: IBT) is a solid pick for investors expecting further significant gains.

The fund has been run by lead manager Carl Harald Janson since September 2013, who has 13 years’ experience in healthcare investing and a further seven years’ experience within the pharmaceuticals industry. Janson reckons there are still good opportunities from mega-cap firms due to their lower-than-market p/e valuations and robust top-line growth. What’s more, he also looks for smaller companies that are potential takeover targets, as he reckons the market is still ripe for M&A.

As expected, US large-caps dominate its portfolio, including Gilead (7.8%), Celgene (7.7%), Regeneron (6.5%), Biogen (5.9%), and Vertex (4.5%) – its five biggest positions. North American stocks account for roughly 85% of its portfolio, while European- and UK-listed firms account for the remainder. Its two biggest European positions are Shire (3.2%) and Denmark’s Genmab (3.0%).

Performance figures for the past five years show the trust earning a total return of 190%, beating its larger rival The Biotech Growth Trust, which gained 180% over the same period. And in contrast to its rival, which doesn’t pay any dividends, the International Biotechnology Trust has a dividend yield of 3.8%.

The post 2 top-performing investment trusts for growth and income appeared first on The Twelfth Magpie.

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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.