Woodford reveals all but is not yet cruising

“We have taken off and we have already gained a lot of height, but we are not yet at cruising altitude,” says Neil Woodford of his new fund. But what do his initial positions represent to sceptical investors still waiting at check-in?

Woodford reveals all but is not yet cruising
Revealed today, the top 10 positions in CF Woodford Equity Income Fund – making up just over half of the portfolio – offer little in the way of surprise for countless investors who backed him during his career at Invesco Perpetual. But do they see enough to tempt them to move over from his successor Mark Barnett? 
Reading down the list, it’s actually all much of a muchness – the top three, AstraZeneca, GlaxoSmithKline and British American Tobacco mirror Invesco Perpetual Income, while there is also place for perennial income choices BT, Imperial Tobacco and Rolls-Royce. Woodford’s mandate for St James’s Place is also of a similar slant. 
The Woodford Airlines trolley remains well stacked with fags and drugs then, though commentators doubt he bought them at duty-free prices. 
“The pharma and the tobacco stocks were long-term holds in his previous life so it must be a bit frustrating to have to pay up (relatively) for them now,” says Ben Willis, head of research at Whitechurch Securities.  
“But naturally Woodford believes these stocks are undervalued over the longer term and will be able to produce the desired risk-adjusted return that was the bedrock of his success at Invesco.” 
He adds: “It is clear that his fund is similarly positioned to the St James’s Place mandate and after looking at this top 10 it is evident the fund is going to be focused on total returns and may not provide a yield premium to the market.”
The most notable surprise might be the 3.6% holding in the AIM-listed healthcare-focused technology company Imperial Innovations, which has a market cap of around £600m. 
“If Woodford’s fund is £1.5bn then his holding is about 9% of the company – £54m,” estimates Tim Cockerill, investment director at Rowan Dartington. 
“I imagine he’s made the investment now knowing that as more money flows into the fund he won’t be able to keep adding to it as the market will see him coming. This could be akin to a one-off initial investment which should fall as a proportion of the fund as more money is invested.”
For Richard Philbin, chief investment officer at Harwood Multi-Manager, Woodford’s top 10 represents a work-in-progress portfolio.
He says: “He has probably had good lines of stock which he has been able to take without moving the price through working with colleagues at his old shop. He’s taken them with the £1.6bn that he has, and with more coming though he doesn’t have the play the market. 
“CF Woodford Equity Income Fund is in the IMA UK Equity Income sector, and with his old funds having moved to the UK All Companies sector, there is an argument that he could get even more money because his competition isn’t necessarily his competition anymore.”

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