Neil Woodford's Latest Buys And Sells

Published in Investing on 30 November 2012

Here's what the City super-investor has been buying and selling.

It's always useful to see which shares the experts are buying, especially in times as uncertain as these.

Neil Woodford is as expert as they come. Through his Invesco Perpetual Income and High Income Funds, he looks after more than £20 billion of client money. His Income Fund has generated a superb 335% return over the last 15 years -- eight times the return of the FTSE All-Share index.

So what has Woodford been buying and selling during the summer? Well, the latest half-year report for his £9 billion Income Fund has just been published, and the document reveals which stocks he's been pumping cash into and which stocks he's been cutting back on or disposing of completely.

Here's what caught my eye.

Big pharma gets bigger

Healthcare continues to be Woodford's biggest sector bet -- it represents over a third of the portfolio -- and big pharmaceutical groups are among his most prominent holdings.

Woodford was a net buyer of the generally unloved 6%-yielding AstraZeneca (LSE: AZN) during the period. He also added to GlaxoSmithKline (LSE: GSK), which offers a prospective 5.5% yield. Astra and Glaxo remain the top two holdings in the fund, each weighing in at over 8%.

Elsewhere in the healthcare sector, Woodford substantially increased his holding in Smith & Nephew (LSE: SN). According to my calculations, his £41 million investment in the medical devices firm increased his stake by a third and was made at an average buy price of 632p a share.

Smith & Nephew's shares are currently trading at 659p, giving a current-year forecast P/E of 14 with an expected dividend yield of 2.2%.

Averaging down on security

Woodford made a new investment in security group G4S (LSE: GFS) before the firm's Olympics staffing blunder sent the shares heading south. He has subsequently averaged down.

Woodford's total investment in G4S during the period for his Income Fund was over £75m and my sums say he bought at an average price of 258p a share. Invesco Perpetual, as a group, has continued to pour money into G4S and as of last week holds over 13% of the firm's shares.

G4S's share price currently stands at 248p, giving it a current-year forecast P/E of 11 and a prospective dividend yield of 3.5%.

Elsewhere in the support services sector, Woodford bulked up his stake in outsourcing group Capita (LSE: CPI) with a £46 million investment at what I calculate to be an average buy price of a little under 700p.

Shares in Capita are now trading at 770p, putting it on a current-year forecast P/E of close to 15 with an expected dividend yield of 3%. As a result of the additional investment and the rise in share price, Capita has recently appeared in the Income Fund's top 10 holdings.

Oil and gas gone

Woodford has been bearish on oil majors Royal Dutch Shell (LSE: RDSB) and BP (LSE: BP) for several years, and his Income Fund has now exited what was a substantial holding in the Footsie's third-ranking oil and gas company, BG Group (LSE: BG).

The proceeds from the disposal of BG amounted to a whopping £343 million, and my sums tell me Woodford sold at an average price of 1,235p a share. That looks like a timely sale, because the shares are currently trading at 1,078p after the company's recent shock announcement that it expects flat production next year.

Phones and food reduced

Woodford's second-largest sale during the period was mobile giant Vodafone (LSE: VOD). The Income Fund's holding fell from 254 million shares to 149 million. My calculations tell me Woodford sold at an average price of 180p a share, netting him proceeds of £190 million. Again, this looks a timely sale, as Vodafone's shares are now around 160p.

Tate & Lyle (LSE: TATE) is another stock that Woodford has significantly reduced, the Income Fund's holding falling from 19 million shares to 7 million. My sums say Woodford sold at an average price of around 670p a share. With Tate's shares currently trading at 770p, the £82 million raised from the sale would today be worth £95 million; so Woodford missed out on some further upside on this one.

Secret of success

Woodford may not get every share call right -- that's impossible, even for him -- but what he has is a philosophy and strategy that have enabled him to build an extraordinary long-term performance record.

If you're interested in learning more about Woodford's market-thumping approach and some of the dividend-paying blue chips he currently favours, help yourself to the exclusive Motley Fool report, "8 Shares Held By Britain's Super Investor". The report is full of valuable investing insights and is free to download right now: simply click here.

> G A Chester does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares of Smith & Nephew and has recommended shares in Vodafone.

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Comments

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closetspeculator 30 Nov 2012 , 2:49pm

G A Chester - Is the Fool payed by Invesco to promote Neil woodford? In my case:
1. If the answer is 'Yes', then I most certainly would not buy any Woodford/Invesco fund, as I now associate him with extreme annoyance, having to read about him on the Fool on an almost daily basis.
2. If the answer is 'No', then what on earth is the Fool doing? Have you guys become star struck teenagers again? You are damaging your (good) reputation at this non stop promotion of Woodford.

richjfool 30 Nov 2012 , 2:55pm

Indeed, it looks like he got quite a few calls wrong, which further increases my ponderings as to why The Motley Fool continues to link virtually every article they write to Neil Woodford's funds & IT's. Please Motley Fool give the man (Neil Woodford) and your own credibility a break.

rober00 30 Nov 2012 , 4:01pm

If this was on one of the many discussion boards around, this Neil Woodford thing would be called "ramping" by many participants and would be the subject of much abuse.

geeWCee 30 Nov 2012 , 4:05pm

Well said Rich...

ANuvver 30 Nov 2012 , 4:15pm

Haven't been able to track down the report itself, but in the timeless journalistic tradition of commenting on a secondary source:

Theme 1: Cash-heavy UK-listed big corps with robust and growing trading in more sparky markets (rather than getting out the safari suit and phrasebook).

Theme 2: Pharma and healthcare - long-term demographic trend. If Zen and Glax fall behind, they can just go shopping and use their marketing and distribution clout, as long as they're canny about it.

Theme 3: Infrastructure and outsourcing. Hint of a shift towards 'picks and shovels' approach.

Theme 4: Nerves about risks in the hydrocarbon space.

Theme 5: Profit taking after a run-up in utilities (in which I include Vod).

All glued together, doesn't seem an unreasonable approach to running an income fund.

TheHowler 30 Nov 2012 , 5:33pm

Just what we need. Another Neil Woodford article.

I and others have asked this before. Apologies if it has been answered and I haven't seen it but...

Is there any financial agreement between MF and Invesco or Neil Woodford? If so it should be disclosed.

duffmanchon 30 Nov 2012 , 5:39pm

Sounds like Mr Woodford has some inside information for both his BG and VOD sales. You don't stick around in the city that long and not make contacts. This makes me think individual shouldn't bother if the market is rigged.

OxonianCambion 30 Nov 2012 , 5:51pm

@closetspeculator: I think it is the other way around. I think they are linking to the same people to boost the search engine rankings of the respective guides, particularly for people who might search for Mr Woodford but not know about MF.

You don't have to read the report tagline each time!

closetspeculator 30 Nov 2012 , 6:41pm

@OxonianCambion - I think there is something going on. I've noticed that every time people bring this topic up and question the reasoning, the Fool writers suddenly go silent and pretend they've not read any comments. Hmmm.

jaizan 30 Nov 2012 , 8:54pm

This article contains valid, fresh & relevant content.

Nothing wrong with learning from the best.

joblot123 30 Nov 2012 , 9:06pm

have to agree with the other posters - MF's credibility is at stake with all this NW promotion.

goodlifer 30 Nov 2012 , 11:33pm

Here we go again!

I agree with OxonianCambion - it's high time you Experts came up with a hard fact or two if they you really want us to think Woody's anything out of the ordinary.

I've had a bit of trawl through your various ads but haven't managed to find very much.

One of your reports says that he has "beaten Footsie over ten - or was it fifteen? - years consecutively!"
Note the scream mark.

Surely a full-time professional who can't beat Footsie's got to be pretty bad?

Then again I saw somewhere that his funds have grown around 350% over 15 years.
I make that a compound growth rate of just over 8.5% a year.
Mr Bland's Doris managed around 11% over about the same period by doing nothing at all, while Warren Buffett achieved more than 25% over about 40 years.
One of our Experts is on record as saying that a dividend reinvestor can reasonably expect at least 12% a year, and my own, admittedly very limited, experience seems to bear this out,

Obviously I may have missed some important data, misunderstood the figures or simply got my sums wrong.

If so, Mr Chester, you'd be doing us all a big kindness if you were to shed a little light on my mistakes and put the record straight for all of us.

MunroMan 01 Dec 2012 , 11:04am

He beat the Footsie by investing outside it.
You might as well say a Jet Ski beat the Oxford and Cambridge rowing eights.

goodlifer 02 Dec 2012 , 1:52pm

LordEssex

I was referring to "This stunning new report, “8 Shares Held By Britain’s Super-Investor,” which says, "Mr Woodford scored a nine-year run – from 2000 to 2008 – where both his High Income and Income funds beat the FTSE All-Share every year!"

Big, big deal!

Do you think I've misunderstood it?
If so, why?

ANuvver 02 Dec 2012 , 2:03pm

Woodford steered clear of dotcoms and dodged the financials meltdown. He got a lot of stick for both decisions at the time.

Dividend investment is a powerful tool, but I feel that while it may have worked hitherto,12%pa return is somewhat on the optimistic side for the future.

Osborne pointedly flagging up the "wealthy" over the w/e. ISA and SIPP changes have been widely mooted, but I hope he keeps his hands off dividend tax rates...

goodlifer 02 Dec 2012 , 3:03pm

ANuvver
"Dividend investment is a powerful tool, but I feel that...12%pa return is somewhat on the optimistic side for the future."

You may well be right, but we're not really talking about the future.

My concern is simply to find out what - if anything - the poor little man's ever done to make to make our Experts think he's so marvellous.

F958B 02 Dec 2012 , 3:17pm

Woody steered clear of dotcoms and financials.

Easy, eh? Two decisions in a decade being an easy route to financial success. Just like the "sell shares, buy gold" has worked since the turn of the millennium.

So why didn't everyone else do the same?

It takes a particular type of investor to be independent, contrarian and forward thinking; to hold their nerve against prevailing sentiment and to take the flak for saying unpopular things about the hottest sectors around.
Woody's record is good - how many of his critics have achieved a higher total return measured over an identical time period?

It's not fair that people who've doubled their money in the "easy money" last four years then compare it to the last fifteen years of hard slog that Woodford has endured.
If you must compare against him use identical time periods.
He's achieved 8% so far in 2012, 11% average per year in the last three years, and the same average per year for the last decade.
Hands up who's managed to beat him. Anyone?

Of all the active (not tracker) money managers out there, Woody is the only one I'd trust with my money. Woody has a slow-but-steady fund. It grows at a decent but not rocket ride pace. It's unlikely to see huge upswings nor huge downswings in value or yield. His worst years only tend to be half as bad as the FTSE, and his best years only half as good. But he's consistent - up every year since 2008, while many of his peers had down years in at least two of those years.
I would trust Woody more than Buffett, despite Buffett's legendary performance.
However, I prefer to manage my own money - I don't then have any excuses or anyone else to blame but myself.

Nowadays Woody's notably steering clear of commodities and financials - not that many investors are crazy enough to listen to the old fool.

In fairness to the Fool site regarding regularly touting Woody: a website needs revenue in order to keep functioning. Advertising and sibscription services is the only easy way to get the revenue to pay the bills, so that parasites like me can continue to get something for nothing from the site.
I just hope that my contributions to the discussion boards and sharing my many years of experience in the markets go some way towards "paying back" what I take from the site in terms of my free membership.

goodlifer 02 Dec 2012 , 7:13pm

Many thanks, F958B
"I would trust Woody more than Buffett, despite Buffett's legendary performance."
I have to admit I'm not altogether with you here.

"A website needs revenue in order to keep functioning. Advertising and subscription services is the only easy way to get the revenue to pay the bills, so that parasites like me (me too) can continue to get something for nothing from the site."

Too right.
But does this really mean every Foolish Expert has to be a sucker for con men and high pressure salesmanship?
If so it does't half undermine one's confidence in their competence and judgment.
I've reached the state where I no longer generally bother to read their articles - apart from those by Mr Bland - I just go straight for the comments, which are often very interesting and helpful.

I can't offer to share "many years of experience in the markets."
My aim is pretty selfish
I just want to learn how better to manage my investments without having to pay for it.
I suppose I like to think the questions I ask, and the statements I offer for criticism, may sometimes help other Fools, but that's not my prime purpose.

ANuvver 02 Dec 2012 , 9:03pm

F:
In no way was I claiming it was easy to call dotcoms and financials (or tulips) right, nor did I mean to detract from Woodford's record.

I've been critical too, but I've also always been of a similar mind about MF's commercial imperative.

I'm a private investor for very similar reasons to yours. I feel being squeezed for 2% fees is too high a price to pay for the scant comfort being able to blame someone else.

goodlifer 03 Dec 2012 , 2:02pm

Thanks everyone for your help.

Nobody's queried my figure of just over 8.5% a year compound growth, so it's probably not far out.
It's occurred to me that I took it for granted Woody reinvested all his customers' dividends, But when it comes to investment you can't assume a goddamn thing.

Did he reinvest them?
Or what?
Anybody know?

If he really achieved that rate of growth while trousering the dividends, even I'd be forced to agree he must be a bit of a genius.
.

F958B 03 Dec 2012 , 3:52pm

Hi goodlifer.

Woody achieved 11% p.a. on a three-year and ten-year view, including dividends reinvested and including his 1.5% annual management fee and other "total expense ratio" costs.
So that's nearer 13% p.a. before his and Invesco's management and paperwork fees.
Most "professionals" underperform the index because of their typical 1-1.5% annual management fee and because the professionals as a group are the market. But even an index tracker will underperform an index due to the 0.25-0.5% annual fee.

With dividends taken out and not reinvested the return on Woody's fund would be closer to your 8% (or about 10% if Woody and Invesco had no fees and no overheads).

These perofrmance numbers are changing every minute of every day as share and index prices fluctuate.
At the moment many year-ago comparisons look especially good because markets were at a low point last autumn.

goodlifer 04 Dec 2012 , 5:27am

Thanks again F958B
I'm more confused than ever now!

"So that's nearer 13% p.a. before his and Invesco's management and paperwork fees."
If Mr Chester's figures are correct, Woody's average over 15 years was around 8.5%, resulting in a 350% increase in his fund

On the other hand, if your figure of 13% is correct his fund would increase by about 340% over 10 years and about 625% over 15.
Unless of course I've messed up the Math..

Incidentally, your figure of 13% is pretty close to the 12% which, according to Mr Bland, is just about the least a HYP reinvestor can reasonably expect.

It would be interesting to hear from someone who's actually let Woody manage some or all of his money, and to find out first-hand what profit he actually got.
Perhaps one of our Experts could oblige?

F958B 04 Dec 2012 , 12:03pm

Has Mr.Bland published a portfolio that actually consistently achieved the promised 12% over a longer period of time?

goodlifer 04 Dec 2012 , 1:10pm

To the best of my knowledge, no.
I don't think it's ever been systematically tested, not even by me - I'm a reinvestor, but not a true-blue HYP.
But it's not inconsistent with my experience so far.

And what of the future?
I'm afraid my crystal ball doesn't seem to work very well any more, so we'll just have to wait and see,

chipspa 04 Dec 2012 , 1:16pm

Please could you provide a link to the half yearly report that shows his holdings
Thanks
Chipspa

M0byDick 04 Dec 2012 , 1:23pm

chipspa - here's a link to the pdf file. the income fund report begins on page 9:
http://www.invescoperpetual.co.uk/site/ip/pdf/mra-icvc-uk2invseriesinterimreport-long.pdf
Foolish best
MobyDick (G A Chester - article author)

F958B 04 Dec 2012 , 1:25pm

For you, chipspa....Woody's Income Fund (a long and weird link, so I hope it comes through properly and works!):

http://www.invescoperpetual.co.uk/portal/site/ip/products/productDetail?contentId=fe0f27688e5ed210VgnVCM1000002e1ebf0aRCRD

drewla 04 Dec 2012 , 10:26pm

Many of the comments on here are rather mean-spirited -- both to Woodford and The Fool.

Woodford is one of the UK's most enduring and successful fund managers. Whether it averages out at 8.5%, or 12 or 13 or whatever..... to achieve these figures over an extended period is pretty darn good, and is a better record than the great majority. For me at least, it is very interesting to see what Woodford is currently buying and selling.

OK, perhaps we are allowed a touch of Schadenfreude at the ones he got wrong -- but any reasonable observer would have to concede that he seems to get more right than wrong. Do we congratulate him for this? Good heavens, no. According to one commenter, "Sounds like Mr Woodford has some inside information for both his BG and VOD sales". And that sounds faintly libellous to me, but I'll let others fight over that one.

It seems there are few things we British like less than other people being successful!

Good article. I look forward to the next peek into Woodford's portfolio.

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