LiontrustJul 31 2017

Liontrust’s Bailey on dodging AstraZeneca share price hit

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Liontrust’s Bailey on dodging AstraZeneca share price hit

Many investors, including Neil Woodford, were caught out by last week's fall in the share price of AstraZeneca, but Liontrust’s Stephen Bailey has revealed the warning signs that prompted him to sell most of his holding over the past year.

AstraZeneca's share price dropped 16 per cent on 27 July, after it was announced the latest trial of one of its cancer fighting drugs, called Mystic, had failed to achieved its stated aim.

Shares were trading at around £50 each on the day before the announcement. They are now at around £45 per share.

Mr Bailey, who runs the £322m Liontrust Macro Equity Income fund, said the market's positive expectations around the value of the Mystic product had been a major contributor to Astra’s share price moving from £46 to £55 this calendar year.

But the fund manager said his caution about the company was framed by a rival pharmaceutical firm also having a cancer treating drug fail to perform as expected at the trial stage.

Mr Bailey said: “The impact of Mystic on AstraZeneca’s share price was always going to be explicitly binary. Since January we’ve seen the company’s share price rise from around £45 to near £55 – much of this on the expectation of a positive result to Mystic. As the adage goes – 'it’s better to travel than to arrive'.

"With the stock priced for success, we felt a disappointment would be a big shock, and saw the need to do something in advance of the outcome."

He concluded: "We much prefer GlaxoSmithKline, the largest holding in the fund, and its emphasis on long duration vaccine and consumer health assets, giving a reassuring visibility that is often lacked by more exciting peers.”

The fund manager reduced his investment in AstraZeneca shares from 5 per cent of the fund’s capital, to the 0.8 per cent level at which it stands today.

David.Thorpe@ft.com