Woodford announced a dramatic shift into domestic cyclical stocks in his flagship Equity Income Fund last week on the back of what he sees as a strong economic backdrop in the UK, with analysts unsurprised by his contrarian stand point.
In one of the biggest changes he sold his stake in GlaxoSmithKline, which he had held for 15 years, and opted for a holding in Lloyds Banking Group signalling his first foray into banks since 2003.
John Monaghan, a senior investment research analyst at Square Mile, said he was not surprised by the move as underlying data for the UK has been stronger than markets have perceived.
“I think it played to his more contrarian views,” he said.
“What is more telling is some of the more smaller, domestic names that came through such as Topps Tiles and Card Factory, that does play to the more contrarian stance he can take, they have been batted around a bit since Brexit and it’s a more telling indication of his thoughts than the bigger Glaxo to Lloyds shift”.
He added: “Obviously, he’s not immune from mistakes but he studies the macro picture quite a lot and some of the numbers that are coming through are not as negative as the market perceives them.”
However, Monaghan believed it is more likely Woodford is “taking advantage of some of these anomalies on a stock by stock basis” rather than making a big call on the long-running debate of value versus growth.
Morningstar’s senior manager research analyst Peter Brunt said Woodford’s shift was good news for the UK banking sector.
