Neil Woodford’s bid to turnaround his £8.8bn Woodford Equity Income fund has seen the fund manager dispose of holdings in some large cap medical companies, and buy into more businesses exposed to the UK domestic economy.
Mr Woodford’s fund is the absolute worst performer in the IA UK Equity Income sector over the past year, returning 1.1 per cent, compared with 11 per cent for the sector as a whole.
The performance has improved a little in recent months, with the fund now delivering a positive return on a year to date basis following a desperate summer for the portfolio, with a series of the largest holdings in the fund suffering stark share price falls.
Mr Woodford bought more shares in one of those companies, Provident Financial, in recent weeks as the share price has recovered from summer lows.
He has for some time held the view that the UK economy will perform better than expected in the coming months and years.
With this in mind he has been buying the shares of banks and housebuilders.
In September, Mr Woodford sold all of his shares in pharmaceutical companies Gillead and Abbvie, saying the prospects for the company are strong, but the shares are presently too expensive to be a prudent investment.
The fund manager deployed the capital in the shares of Card Factory, an existing holding, broadcaster ITV, and Warehouse REIT, a property company.
Mr Woodford said he took advantage of the share price weakness of Card Factory to increase his stake, as the firm is “well run”.
ITV shares have dropped from £2.19 in April 2017 to the current (19 October) level of £1.76.
Warehouse REIT is a company that owns industrial warehouses.
Oliver Brown, who runs the £9m MFM Primary Opportunities fund, is also keen on these shares.
He said: “Warehouses have been the best performing part of the UK property sector over the past few years and this is expected to continue as online retail continues to grow. The shares are forecast to pay an attractive dividend yield of 5.5 per cent.”
Laith Khalaf, senior analyst at Hargreaves Lansdown said investors should be relaxed about Mr Woodford’s recent poor performance.
He said: “It’s important to keep some perspective.
"Despite Woodford’s recent poor run the Woodford Equity Income fund is top quartile in the sector since it was launched in 2014.
"This might come as a surprise given the recent spate of headlines concerning some of Woodford’s holdings, but the manager’s high profile and his decision to be transparent and publish his full portfolio has made him a bit of a lightning rod every time there’s an issue with one of this holdings.
"Of course, no manager is totally immune to going off the boil, and very recent performance has been disappointing.
"However over short periods, luck plays a big part in fund performance, and it’s only over the long term that skill becomes more evident.
"To that end Neil Woodford has an exceptional 30 year track record, and has made some investors very wealthy indeed, turning £10,000 invested in 1988 into £300,000 today.”
David.Thorpe@ft.com
