"Unless you think scientific discovery will suddenly come to an end, pharmaceuticals are incredibly cheap," said Mark Barnett, who manages the £167.3m UK Strategic Income fund.
"Valuations have gotten so low that they imply these companies are about to fall off a cliff, which we strongly disagree with."
Barnett thinks the relative stagnation in the pharmaceuticals industry in the last 10 years or so has turned many investors away. However, the manager thinks this presents a significant buying opportunity.
"The nature of drug discovery is changing," he said. "In the past the industry has focused on the chemical side, but we are now entering the biological sphere."
"In the late 90s companies promised more effective biological cures, but this has failed to come through as quick as many people expected. The timelines for these projects have shifted, and the market seems to have gotten tired of waiting."
Performance of indices over 10-yrs
Source: FE Analytics
"The sector is arguably the most unloved in the entire stock market. However, with a globally aging population, the need for new drugs is higher now than it has ever been. The macro picture for pharmaceuticals is very positive."
Invesco Perpetual UK Strategic Income has a 17.32 per cent weighting to healthcare; an overweight position of 8.32 per cent. GlaxoSmithKline and AstraZeneca both feature in Barnett’s top-10 holdings.
Stephanie Butcher, who manages Invesco Perpetual European Equity Income, agrees that pharmaceuticals are excellent value for money.
"I’d agree that it’s the stand-out opportunity at the moment," she said. "In the past, there were very good drugs but management was less effective at managing costs. Top line pressure in the last decade has improved financial planning, and now cash-flow is coming through."
Roche Healthcare and Novartis are the two biggest holdings in Butcher’s portfolio, with respective weightings of 7.22 and 7.79 per cent. Invesco Perpetual European Equity Income is 7.28 per cent overweight healthcare compared with the average fund in its IMA Europe ex UK sector.
Paul Boyne’s Invesco Perpetual Global Opportunities fund also holds Roche Healthcare and Novartis, as well as GlaxoSmithKline.
"Globally, the sector is very cheap. It’s a mainstay of all of our portfolios," Boyne finished.