Questor is The Telegraph’s stock-picking column, helping you decode the markets and offering insights on where to invest.

As the American investment writer Jim Grant said: “Successful investing is about having other people agree with you... later.”

The danger therefore with contrarian, value-oriented portfolio picks is that the investor needs a catalyst to change perception of the potentially unloved, undervalued stock. If that catalyst does not appear, then the stock can stay cheap or get cheaper – and that is what seems to be happening at Hikma Pharmaceuticals.

However, it is still very early days and we are more than happy to keep the faith, even if the share price and earnings estimates are yet to show any positive momentum.

Just as February’s full-year results for 2024 failed to please all, the first-half results for 2025 have not proved to be particularly crowd-pleasing either. Sales and profits were down as expected and chief executive officer Riad Mishlawi made no changes to full-year guidance.

As a result, Hikma still expects to generate revenue growth of 4pc to 6pc and record what it terms as a “core” operating profit between $730m (£544m) and $770m, compared to $719m last year.

A 12pc increase of the interim dividend to $0.36 suggests there is no lack of confidence in that outlook statement and such a hike at this stage means that full-year analysts’ consensus forecast for a barely changed distribution look more than a little conservative.

However, analysts did not like the mix of sales and profits in the first half, as injectables slightly undershot forecasts and Mr Mishlawi gently steered down profit margin forecasts for the division for the year.

Upgrades at the in-licensed branded drugs arm and a solid showing from the third business area within Hikma’s portfolio – oral generic treatments – did nothing to convince the doubters.

As a result, we shall simply have to sit tight and view the company as holding a strong competitive position, as evidenced by its healthy profit margins.

A forward dividend yield of more than 3pc and valuation of less than 13 times consensus forecast earnings give us the opportunity to do so, while net debt is relatively low and interest cover is more than three times, on the basis of 2024’s full-year results.

There is no undue pressure from the balance sheet to restrict management’s room for manoeuvre as Mr Mishlawi and his team target revenue growth at a compound annual growth rate (CAGR) of 6pc to 8pc and core operating profit increases at 7pc to 9pc CAGR across 2024 to 2027. Attainment of a $5bn sales goal by 2030 would force substantial earnings upgrades.

Story Continues

Questor says: buy

Ticker: HIK

Share price: £18.36

Update: Assura takeover completed

A takeover battle that dates back to Valentine’s Day finally closed with confirmation of the acquisition of Assura by Primary Health Properties last week. We initially highlighted Assura as a potential option for income-seekers but ironically have bagged a healthy and rapid capital gain of more than 40pc and a total return nearer to 47pc, once dividends are taken into account.

Primary Health Properties outbid KKR with a final approach that carried a value upon launch of 53.3p a share – formed of 12.5p cash, a special dividend of 0.84p and 0.3865 PHP shares for every Assura share owned.

This means owners of Assura now have a position in PHP and this enters the Questor portfolio.

The investment narrative and themes are very similar, since the FTSE 250 index member is a leading investor in modern healthcare properties across the UK and Ireland where the portfolio comes with very high occupancy rates, long-term leases and upward-only or indexed rent reviews.

Demographic trends remain strongly favourable and PHP can point to a record of 28 consecutive increases in the annual dividend.

As regular readers know, Questor prefers to focus more on valuation than it does narrative – but there is potential here, too.

Prior to the completion of the Assura deal, which increases the share count by 793 million to 2.1 billion, PHP traded on a discount to its net asset value (Nav) per share of 105p. Based on last year’s dividend payment of 6.9p, the yield is 7.5pc.

Both metrics seem attractive. The stock element of the purchase price may cause some indigestion in the short term, so the shares may not do too much in the near term. Any such hiatus will give us a chance to reassess the numbers now the Assura deal is done.

Questor says: hold

Ticker: PHP

Share price: 94.2p

Read the latest Questor column on telegraph.co.uk every weekday at 5am. Read Questor’s rules of investment before you follow our tips.

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