Woodford Equity Income
The Invesco Perpetual High Income fund opened in 1988, under the watchful eye of Neil Woodford. Every £1,000 that was invested at launch was worth just short of £24,000* when Neil quit the management role late last year. On his departure, investors and peers were eager to find out if he could do the same again.
The past three months...
When the fund initially launched, back in June, there was a lot of speculation as to where Neil would invest, and what stocks he would buy.
In May, he surprisingly announced that he had bought stocks from UK bank HSBC, something he had not done since 2003, and it accounted for a staggering 2%** of his portfolio.
In a shock decision, only four months later Woodford sold his shares in the banking group. He was not necessarily saying that the HSBC was a bad investment, but was concerned about the increase in fine inflation. Fine inflation is a term coined to explain the increase in the number of fines received. These fines are put into place when regulatory laws are broken. Woodford analysed the risk of these future fines as an 'unquantifiable risk' to investors, and sold the shares, as the future fines could damage the bank's ability to pay a dividend.
Other than tobacco and pharmaceuticals, which Neil has been continually drawn to, he has also been greatly excited by the technology sector. Darius McDermott, managing director at Chelsea, had dinner with Neil Woodford earlier this year, where Woodford spoke of the UK as being the 'best country in the world for innovation and scientific advance'. It is not a coincidence that we have three of the top universities in world***, but as a country we are not great at turning science into business. Woodford muses that this is because the scientists are too busy looking for funding and not doing the science. For Woodford, it is here, that the best opportunities lie.
So where is he investing?
Woodford Equity Income fund, has a generic Chelsea Risk Rating of 5, is a 'buy' and will be in our Core Selection when our Viewpoint is published at the beginning of next month. The fund available to Chelsea clients has returned 2.8%^ since launch on 19th June 2014, compared with a loss of 0.65% for the average fund in same sector, over the same period. It is the best performing fund, out of 89 in the IMA UK Equity Income sector, over this period.
Since launch Woodford has invested the £2 billion plus from private investors in a range of stocks, from his long-term favourite tobacco sector to Bricks, 'an innovative new estate agent with a highly disruptive business model'.
Woodford has also purchased shares in Royal Mail, pharmaceuticals, and start-up companies, with up to 7% in very small companies, including unquoted companies.***
Woodford has recently increased his position in AstraZeneca, BAE Systems, Drax, Legal & General and the biggest winner Allied Minds, a company commercialising intellectual property, with price growth of north of 40% since it came to the market, and the half-year results showing 'considerable potential'.
Want to invest?
We are nearly half way through the financial year, and the ISA allowance has been increased to £15,000 (£4,000 for Junior ISAs). You may be interested in investing in this fund, or any of the other 2000-odd funds we hold on the Chelsea FundStore. To do this, simply:
Sources
* whatinvestment.co.uk, 21st May 2014
** whatinvestment.co.uk, 16th May 2014
*** The Guardian, 16th September 2014
^ FE Analytics, 29th September 2014