Over the last two weeks, I sold my position in Bellevue Group at an average price of CHF 24.5 per share realizing a total profit of 80.1% and an IRR of 31.7% over a 30 months holding period.
My original investment thesis to be found here and here mostly materialized. Assets under management grew not only through the acquisition of StarCapital but also organically. The loss making banking segment has been restructured and is now on its way to become a profitable wealth manager. Consequently, Bellevue’s true earnings potential came to light over the last two years.
Nevertheless, Bellevue Group is still depending to a large extent on its BB Biotech mandate representing more than 50% of annual fee income. Given the relatively high volatility in biotech stocks (e.g. the recent 30% drop in the share price of Celgene), I anticipate results to fluctuate with the performance of the biotech/health sector. For 2017, I expect net profit to reach CHF 21 m turning into a price earnings multiple of 16 times. The company has roughly CHF 40 m in seed capital and other investments on its balance sheet and there is potential for additional profit coming from the banking segment in 2018. Consequently, the stock does not look overpriced at the moment.
However, any sharp contraction of the health/biotech sector will have a significant effect on earnings. As the company’s full earnings potential is now largely reflected in the stock price, I decided to sell my position.
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