Unpicking the risk/reward in healthcare stocks

2016 saw several blow-ups for large drug companies

In a world where there continues to be much economic uncertainty, healthcare looks an increasingly attractive area for investors. Demographic changes such as an ageing population and increasing wealth underpin visible demand growth, writes Paul Major, co-manager of the BB Healthcare Trust.

The most popular way for UK investors to gain healthcare exposure has been through holdings in large pharmaceuticals companies, which are perceived as diversified and low risk. However, the reality can be very different. The issue is that, while you may think you are gaining exposure to a broad range of healthcare revenue streams, these companies are often reliant on the success of one or two drugs trials that account for the majority of future revenue and profit growth. Unpicking the risk/reward profile of these companies can be particularly hard for non-specialists to unravel. BB...