The Aberdeen Standard Investment duo that have inherited the Woodford Income Focus fund has made jibes about Neil Woodford’s illiquid and underperforming holdings as they unveil a completely revamped top-10 holdings.
In an update on the ASI Income Focus fund, which will reopen on 13 February, fund managers Thomas Moore and Charles Luke revealed National Express Group, Mondi and John Laing group as their top-three holdings.
There is not a single common stock in the ASI top-10 holdings that had been in the top-10 holdings under Woodford. The Woodford Income Focus fund had included a number of UK housebuilders with Barratt Developments its largest holding followed by Bovis Homes.
Spelling out the transition of the portfolio, the pair stated they had “improved the liquidity profile of the underlying holdings, increased the portfolio’s sector diversification and sold down structurally challenged companies”.
Duo pans Honeycomb trust and Card Factory
They singled out two former Woodford holdings for contributing to the 4% underperformance compared to the FTSE All Share over the course of January 2020.
These were the Honeycomb Investment Trust and Card Factory, both of which featured in Woodford’s top 10 and contributed 0.64% and 1.23% respectively to underperformance.
The ASI pair described Honeycomb as a “highly illiquid stock with a significant ongoing overhang from large shareholders perceived by the market to be likely sellers”.
“As such, it was necessary to place the stock at a discount to the prevailing market price. However this did not reflect a distressed valuation for the asset by any means and allowed us to reinvest the proceeds in more liquid stocks in which we see greater total return potential.”
Card Factory’s underperformance was attributed to a profit warning due to poor Christmas trading. The pair described this as “a development which reinforced our conviction that this stock did not merit an ongoing place in the portfolio”.
Close Brothers and Ashmore among portfolio additions
Close Brothers, SSE and Assura are among the domestic holdings the pair highlighted as additions to the concentrated portfolio that will target 30 to 40 stocks.
In terms of internationally-focused stocks, the fund now holds Coca-Cola Hellenic, TUI Group and Ashmore.
While the pair noted Convatec, Coca-Cola Hellenic and Countryside Properties had already contributed to performance since the portfolio’s transition, they did acknowledge some underperformance due to the effect of the coronavirus on markets.
TUI Group and Inchcape were singled out as taking a hit from the virus.
But they argued the operating and income generating fundamentals of the businesses were sound.
ASI overhauls Income Focus top-10 holdings
| ASI Income Focus (Feb 2020) | Woodford Income Focus (Oct 2020) |
| National Express Group (3.77%) | Barratt Developments |
| Mondi (3.74%) | Bovis Homes |
| John Laing Group (3.66%) | Provident Financial |
| British American Tobacco (3.63%) | Honeycomb Investment Trust |
| Inchcape (3.61%) | Taylor Wimpey |
| Close Brothers (3.60%) | Crest Nicholson |
| Onesavings Bank (3.49%) | Card Factory |
| TUI (3.33%) | BT |
| Babcock International Group (3.31%) | RBS |
| National Grid (3.30%) | Imperial Brands |
