It has been a cracking past year for the NIB Holdings Limited (ASX: NHF) share price, climbing nearly 60%. Yet, one fund manager still considers the health insurer an attractive proposition.
At the time of writing, the company's shares are down 0.7% to $7.13. Furthermore, the NIB share price is ~2% off its recently reset 52-week high of $7.30.
Could the NIB share price run higher?
Earlier this morning, I covered a few key takeaways from the Prime Value Opportunities Fund June update. In contrast, the team also operates an 'Emerging Opportunities' fund which focuses on ASX-listed companies outside the ASX 100.
Impressively, the Emerging Opportunities fund delivered a 42% return after fees in FY21. This represents an 8.8% outperformance of the S&P/ASX Small Ordinaries Index (ASX: XSO).
The fund openly dismissed speculation of a near-term market downturn. Rather, Prime Value reiterated its high-conviction stock-picking approach – noting that short-term weakness would present opportunities.
Speaking of opportunities, the fund highlighted the NIB share price as 'very attractive' on a two-to-three-year time horizon.
In its update, the Melbourne-based Australian investment manager said:
The consensus view is that profit margins are unsustainably high and it's better to own the health providers as elective surgeries, etc. return. We agree NHF's margins will fall but using long term, sustainable margins, the company is very attractively priced. And in the meantime it generates very high cashflows, boosting the balance sheet. To us, fundamental underlying value is more important than short term earnings trends.
Based on the current NIB share price, the company trades on a price-to-earnings (P/E) ratio of 32.9. For dividend investors, NIB health offers a 1.96% dividend yield.
Funds' top holdings
Portfolio Manager Richard Ivers has put a heavy emphasis on financials, consumer discretionary, and industrials for the Emerging Opportunities fund.
However, the top five holdings include City Chic Collective Ltd (ASX: CCX), EQT Holdings Ltd (ASX: EQT), Mainfreight Limited (NZE: MFT), News Corp (ASX: NWS), and Uniti Group Ltd (ASX: UWL).
