UKAug 16 2017

Woodford looks to housebuilder to cement income

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Woodford looks to housebuilder to cement income

High-profile investor Neil Woodford has bought shares in UK housebuilder Redrow, as he believes the dividends will rise markedly.

Mr Woodford described the FTSE 250 company as “well managed” with “attractive growth prospects.”

He has bought the shares for his £707m CF Woodford Income Focus fund, which launched in March 2017.

The fund manager said: “Management has been investing in the company’s future growth and therefore, Redrow’s cash returns to shareholders have been modest when compared to other housebuilders.

"However, as this investment starts to bear fruit, we believe there is material upside in the years ahead.

"Moreover, as with the other construction-related holdings within the portfolio, our position in Redrow also reflects our more positive view of the UK economy.”

Redrow shares have risen from £3.88 to £5.85 over the past year, as housebuilders have returned somewhat to fashion after dropping starkly in the immediate aftermath of the European Union referendum vote. 

Several of Mr Woodford’s largest investments have suffered stark share price declines of late, but he reaffirmed his commitment to several of those by buying more of the stock.

He said he bought more shares in retailer Next and Provident Financial.

Mr Woodford defended his investment in Provident Financial, which reported a 46 per cent drop in profits for the first half to the year at the end of July and was the fourth largest holding in the £10bn CF Woodford Equity Income fund, at 4.65 per cent of the fund.

He also held it as the fourth largest holding in his £707m CF Woodford Income Focus fund, at 3.99 per cent.

Next shares have dropped from £53.80 to to £42.77 (as at 16 August) as investors have turned against UK retail businesses on concerns about consumer spending and the outlook for the UK economy.

Mr Woodford defended his continued bullishness on the shares.

He said:  “This has been the result of lingering concerns about the outlook for the UK consumer economy.

"As regular readers will know, we believe the market has become far too pessimistic about the prospects of the domestic economy and although this has weighed on the share prices of businesses like Next, a compelling and contrarian opportunity has, in our view, opened up.

"As far as Next is concerned, this view was reinforced during the month following a meeting with Lord Wolfson, the company’s chief executive, which reassured us that the company remains a well-managed retailer, determined and well-situated to deliver long-term shareholder value.”

The CF Woodford Income Focus fund has returned 0.14 per cent since launch, compared with 1.39 per cent for the average fund in the IA Specialist sector in the same time period.