Update: BB Biotech

This Swiss biotech trust, by contrast with the two covered above, trades at a hefty premium: 30.5pc at last night’s share price of 77.6 Swiss francs relative to its last reported net asset value of 59.45 francs.

It’s hard to see why this trust deserves so large a premium when its two London-listed rivals trade in line with their NAV. Stifel speculated last month that the reason could be the trust’s policy not to issue new shares and its 4.6pc yield, which derives from the sale of investments rather than natural income.

BB Biotech also, unlike Biotech Growth and International Biotech, benefited from the success of the Covid vaccines. The trust bought a stake in Moderna in 2018 and it remains by far its largest asset. “This investment has significantly helped returns over the last 12 months but despite this the longer-term performance of the [fund] lags Biotech Growth and International Biotechnology, as well as the Nasdaq Biotech index,” Stifel said.

It described BB Biotech as “overvalued” and said there were no signs that it should outperform the two London-listed trusts in future. “We downgrade our rating to negative. We suggest investors switch into one of the alternative, cheaper [trusts].”

Questor has not tipped BB Biotech, going no further than putting it on our “watchlist” in 2017. We’ll continue to prefer the other two. 

Questor says: avoid

Ticker: SWX: BION

Share price at close: 77.60 CHF

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