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Investor Views: High-Tech and Pharma Shares for my SIPP

Private investor Ken Piercy has made good returns by investing in pharmaceutical and technology stocks  

Emma Simon 24 April, 2019 | 12:19PM

Semiconductors

Ken Piercy describes himself as a “seasoned investor” who has been dabbling in the stock market for at least 30 years.

He first started investing during the privatisation of the late 1980s, and then held shares in a number of building societies that demutualised and listed on the stock market during the 1990s.

Piercy – who is hoping to retire within the next 10 years – says: “These privatisation shares delivered excellent returns, and taught me the value of investing in companies that paid decent dividends.”

Few of these companies now exist in the same form: British Gas, for example, has split into two separate listed companies.

Piercy says his experience of investing in demutualised building societies was not as rewarding. “Many of these companies – such as Halifax, now part of Lloyds, Bradford & Bingley and Northern Rock – saw impressive share prices rises initially. But these gains quickly disappeared as a result of the credit crunch and subsequent financial crisis.

“In my case, my holding in B&B ended up being virtually worthless, as the company was effectively renationalised.” Selected assets of the bank were subsumed within Santander.

As a result he now holds far fewer financial stocks.

Tech Focus

Piercy has worked in the IT industry for many years. So while he has tried to build a balanced portfolio, across different sectors and geographical regions, he has had a focus on technology stocks.

He mainly invests via a SIPP, but he also has a share dealing account – both of which he now holds with Charles Stanley. He says: “I find the charges competitive and the site has a wealth of information about individual shares as well as funds.

“I am able to also invest in overseas shares as well as investment trusts, which I often use to gain additional geographical and sector diversification.”

When it comes to his main shareholdings, some of his best long-term holdings have included some high-tech and pharmaceutical companies.

These include larger companies – such as Intel (INTC) and AstraZeneca (AZN), as well as smaller companies, such as Science Group (SAG).

Intel, a US tech company listed on Nasdaq, is the leader in the integrated design and manufacturing of microprocessors found in PCs and servers.

The company’s share price has grown steadily over the past decade with more rapid growth  since 2017.

Morningstar analysts point out that with the rise in interconnectivity of devices ranging from PCs to smartphones, Intel strives to provide the most powerful and energy-efficient silicon solution to any product. It also adds that data-centres used to facilitate the information stored, analysed, and accessed by various front-end devices are mostly run with Intel server chips.

The company has a four-star rating from Morningstar, and is currently trading below its fair value estimate of $65.00. According to Morningstar analysts, this high-tech company has a wide economic moat, meaning its markets are well defended from rival companies.

AstraZeneca and Science Group

Pharmaceutical giant AstraZeneca has a three-star rating from Morningstar. Its analysts say: “AstraZeneca has built its leading presence in the pharma and biotech industry on patent-protected drugs and a developing pipeline that add up to a wide moat.

“The replenishment of new drugs is finally offsetting the recent patent losses on gastrointestinal drug Nexium and cholesterol reducer Crestor that have weighed on the company's growth potential.”

Morningstar points out that its current share price is currently trading above its fair value estimate of £54.60 – but, like Intel, it has a wide economic moat.

Science Group is a smaller business services company, listed in London. Through its subsidiaries it provides independent advisory and product development services focused on science and technology initiatives.

It has delivered impressive returns for shareholders. According to Morningstar data, over the past decade it has delivered total annualised returns of 27.58%.

Piercy says that he has seen the share price more than double since he has invested in all of these companies. “At the same time these shares have also paid decent dividends.”

Just Undeperforms

Not all of his shareholdings have performed as well. Piercy points out that he also has a holding in Just Group (JUST), where the share price has slid in recent years.

He says that while the company continues to pay a dividend he will still invest. According to Morningstar data the dividend yield is just over 4%.

This is another financial company, albeit one that specialises in providing retirement income products to both individuals and companies. Piercy says that with an ageing population he can see increased demand for this kind of service – though he says this hasn’t been reflected in the share price in recent years and he hopes for a turnaround. According to Morningstar data the company has delivered total annualised losses of 11.5% over the past five years.

Piercy says that where possible he reinvests his dividends. He plans to continue investing after retirement and hopes to simply draw down an income from his portfolio to subsidise his various company pensions.

He says: “At the moment my daughters are currently both away studying, but hopefully in a few years I will be in a position to release some capital to help get them on the housing ladder.”

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AstraZeneca PLC6,979.00 GBX0.91
Intel Corp51.64 USD-0.86
Just Group PLC59.80 GBX-3.47
National Grid PLC883.80 GBX-0.87
Science Group PLC192.50 GBX0.00

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk

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