Royalty Pharma captures long-term healthcare demand through biopharma royalty streams on innovative drugs that treat age-related diseases. This offers durable, high-margin cash flows that are uncorrelated to cyclical markets, positioning the company favorably in a challenging economic environment. The manager highlights that Royalty Pharma provides high-quality, royalty-based pharma exposure at reasonable valuations compared to high-growth tech, indicating a strong belief in its potential for sustained performance.

Our most recent addition in the healthcare sector, Royalty Pharma, continues to deliver on its medium-term plan. The company earns royalties through financing a diversified collection of drugs which are already in production and has options over successful phase three results from the companies they support. They have reported positive outcomes from a few of these trials in 2026, allowing marginal increases in our forward-looking estimates. So far this year shares are up 47% and still trade on about 11x cash flow.

Royalty Pharma (RPRX) is a very cheap healthcare royalty investor that we believe can compound capital for an extended period. The company operates in a niche market that allows it to generate stable cash flows from its royalty agreements, which we see as a strong foundation for future growth. Given the current valuation, we think there is significant upside potential as the market begins to recognize the value of its business model and the quality of its portfolio.

We created capacity for a new investment in Royalty Pharma (RPRX), as the portfolio was at its 20-position limit. RPRX holds a unique position as the only publicly traded pharmaceutical royalty company, with a significant 56% market share. It is often the first call for pharmaceutical companies seeking funding, granting access to the most promising opportunities. RPRX has a proven track record of selecting winning drug candidates, generating returns in the low teens and compounding royalty revenues by 13% annually. Our analysis suggests the intrinsic value of RPRX lies within a range of $40 to $78 per share, indicating substantial upside potential from our initial purchase price of $30 per share.

We own Royalty Pharma (RPRX $31.03), a relatively insulated healthcare royalty investment company name trading for 6.6x earnings. This valuation suggests a strong opportunity given its business model, which provides a stable income stream from royalties on pharmaceutical products. The company's positioning in the healthcare sector allows it to navigate economic fluctuations effectively, making it a compelling addition to our portfolio.