The previous month, June 2017, marked the start of Mr Woodford’s recent woes, courtesy of the first in a series of profit warnings from doorstep lender Provident Financial.
But it isn’t the high-profile blow-ups that have done the most damage to Woodford’s fund in the near term. His largest holding, Imperial Brands, has declined more gradually - yet its weighting, at over 6 per cent of the portfolio, means its 18 per cent decline has cost 1.6 percentage points’ worth of performance since the start of the year, according to Morningstar.
On a 12-month view, its 2.7 percentage point impact is rivalled only by Provident and by Prothena, the US healthcare stock that came under attack from short sellers at the end of 2017.
Imperial Brands’ decline is partly down to investors viewing a long-mooted takeover by rival Japan Tobacco as, well, an increasingly long shot. Plausible noises to the contrary would be a boon to the fund.
What could be the other catalysts for a return to form? Most simple is signs of life at underlying businesses. Burford Capital, which provides funding for litigation cases, jumped 30 per cent on 14 March as results impressed. A top-ten holding in the Income fund, Burford has now added 1.5 per cent to performance over the past year – well in advance of any other holding.
Mr Woodford’s principle argument is that his performance will improve when the market stops focusing on “momentum” and starts to look at valuations more closely. This isn’t as simple as saying he’s a defensive manager in a growth market, but some metrics do define him as such. Woodford Equity Income looks cautious even by the standards of the equity income sector, according to Morningstar data.
As of 31 January, 35 per cent of the fund is in defensives, 46 per cent in cyclicals, and 18 per cent in halfway-house ‘sensitive’ sectors. That compares with respective sector averages of 21, 40 and 28 per cent.
A closer look colours that impression. The largest single sector overweight is to healthcare, helped by a healthy position in pharmaceuticals.
But much of the rest is biotech and life sciences. Those companies may well outperform if their businesses start showing signs of success. But momentum trades going into reverse could mean investors look for safe havens, not just attractive valuations, and these holdings are unlikely to qualify by that metric.
The last word should go to the manager, who contests this notion. A spokesman says Mr Woodford, unsurprisingly, remains confident in his thesis: “While there are risks, there are equally opportunities – that is always the case when markets get carried away. He believes the best opportunities lie in UK domestically-focused stocks, a healthcare sector that has endured a prolonged bear market and companies (of all sizes) that have disruptive technologies at their core.”