Woodford has upped his stake in consumer credit business Provident Financial, one of the biggest headaches for his Equity Income fund in 2017, days after the business confirmed its recovery was on track and its cash positions were strong.
A RNS statement on Thursday revealed the star manager had increased his holding in the doorstep lender from 23.58% to 24.06%.
Woodford had previously boosted his stake in the firm from 24% to 25% in May but sold this back down in the middle of September.
His former employer Invesco Perpetual has the second largest stake at 22.56%, followed by Schroders which owns 8.96% of the firm.
The news comes days after the FTSE 250 lender posted its Q3 update in which it said its three core businesses were making “sound progress”.
Provident contributes to underperformance
Provident Financial was one of the biggest underperformers in Woodford’s £5.6bn UK equity income fund last year after a series of profit warnings, FCA probes and management scandals knocked 70% off its share price.
Woodford’s funds severely lagged peers in the UK All Companies sector in 2017, returning 0.53% versus the sector average of 13.99%.
But Woodford has continued to stand by the troubled lender, now the fifth largest holding in his equity income fund, representing 4.05% of the portfolio.
Last month he said that stress and contagion effects from emerging market currencies had validated the strength of his UK stock picks which he said remain undervalued by markets.
The Woodford Equity Income fund has continued to lag the sector this year. It has delivered returns of -12.22% compared with the sector’s -6.81% year-to-date. Performance in the short-term has picked up, however, with Woodford’s fund beating the sector returns of -9.6% over the last three months with returns of -5.3%.
Lender’s recovery a ‘work in progress’
Provident’s shares have continued falling this year and are currently down 25% at 502p year-to-date.
In its Q3 update earlier in the week the company said the recovery of its businesses was progressing well and its funding and capital positions were strong.
JP Morgan Cazenove lowered its 2018 full year earnings estimates for the firm by 6% to £157.8m in an analyst note published on Monday.
While it noted the group had made “sound progress” in the third quarter with two of its core businesses, Vanquis Bank and Moneybarn, delivering growth in line with expectations, it added the recovery of Provident’s home credit business was a “work in progress”.
The level of collections were 10% below historical levels which the firm said was due to its collectors being restricted until FCA authorisation is granted.
Provident CEO Malcolm Le May said at this stage the home credit operational recovery plan is “substantially complete” and the firm “remains the clear leader in the market”.
