Stable Healthcare Plan Design: Optima Health's Strategy Resilient to Market Fluctuation
In the chaos of Donald Trump's pressure on trade and tariffs, investors are scrambling for so-called safe haven assets. Gold is reaching record highs as people from banks to governments search for a protective barrier against the increasing tension between the U.S. and China.
At home, people are seeking comfort in traditional 'defensives'. Stores like Tesco and Sainsbury, and even the tobacco sector, are experiencing renewed interest. The common denominator is steady earnings and dividends in tough times.
Analysts are scouring the small and mid-cap sector for the same qualities. Deutsche Bank recently highlighted its top 10, a predictable list of British businesses, largely shielded from tariffs and the now-looming threat of global recession.
But what big banks and their peers are missing, mainly because their algorithms don't allow for it, are value stocks below the £500 million threshold.
And there, hidden in the overlooked undergrowth of the market, are a handful of businesses that are cash-flow positive, growing, stable, and, for the most part, untroubled by the mess of bad news coming from Washington.
One such company, though not the only example, is Optima Health. With a market cap of just £160 million, it might not show up on most institutional screens, but it probably should.
Optima's model is straightforward, but well executed. Its buy-and-build strategy has been tested enough to suggest the business can continue to make earnings-accretive acquisitions that support growth.
Led by CEO Jonathan Thomas, the company provides outsourced occupational health services. These include risk management, health surveillance, fitness assessments, workplace health advice and adaptations, employee wellbeing support, and clinical interventions to help employees remain healthy at work.
The aim is to maximize attendance and job performance while safeguarding employee health and ensuring their roles are suitable. At its core is a digitally-enabled, flexible operating model that allows the business to scale quickly as contracts and acquisitions come in.
Optima supports over five million employees across the UK and directly employs over 800 occupational health clinicians, around 1,500 staff in total. Its infrastructure includes over 50 occupational health clinics, more than 1,700 counseling providers, and over 900 physiotherapists, all supported by 38 mobile screening units.
Optima's revenues are long-term, contracted, and recurring, primarily drawn from both the public and private sectors. "This makes us pretty resilient to economic shocks and disruption," says Thomas. Occupational health, he points out, is a regulatory necessity, not an optional extra to be cut in hard times.
The defensive profile makes Optima stand out. The UK occupational health market is worth £1.2 billion and is forecast to grow at 4% a year through 2028. Despite this, 80% of UK employers still don't provide any occupational health support, even as illness and presenteeism cost the economy an estimated £150 billion annually.
Optima is targeting a 25% share of the market through a mix of organic growth, expansion, and acquisitions. While institutional investors have been slow to spot small businesses like Optima, it's a promising opportunity for investors seeking safe, growing value stocks.
- Despite the chaotic trade environment, investors are also considering 'stocks' like Tesco and Sainsbury, signifying a return to traditional 'defensives' in uncertain times.
- Analysts are scrutinizing the small and mid-cap sector, searching for businesses with steady earnings and dividends, similar to these 'stocks'.
- One overlooked sector that big banks and their peers may be missing are value 'stocks' below the £500 million threshold, where companies like Optima Health could be found.
- Optima Health, with a market cap of £160 million, is a growing and stable company providing occupational health services, offering a 'quixotic' yet promising investment opportunity in the current market.
- Optima's resilient business model, along with the growing demand for occupational health services in the UK, highlights it as a strong investment choice in the 'finance' sector, especially for investors seeking safe, growing 'value stocks'.
