Topical Issues

Latest on the Woodford Fund 04 July 2019

Neil Woodford has spent much of the past week reducing his holdings in listed small cap firms with businesses in biotech and healthcare.

The fund manager announced on Monday (July 1) that his Equity Income fund will remain suspended for a further 28 days as he battles to raise the cash to reopen it.

The fund was first suspended on June 3 following a period of underperformance and a wave of redemptions that was running at £9m a day in May.

When announcing the suspension, Mr Woodford said when the fund reopens it will contain fewer small caps, and more FTSE 100 stocks, though he emphasised that his view of the market had not changed. 

Among the small caps Mr Woodford has sold some of his shares in over the past week is Benchmark Holdings, a £306m Alternative Investment Market (AIM) listed company engaged in using technology to develop more sustainable food production.

A stock market filing on July 2 shows Mr Woodford cut his holding in the company from 12.4 per cent to below 5 per cent. The company’s shares have fallen from 60p to 53p over the past year. 

The fund manager continued to dispose of his holding in Horizon Discovery Group, a £240m biotech company, having cut his stake to 7 per cent from the previous 10 per cent in June. The manager now owns less than 5 per cent of the shares. 

Mr Woodford also sold 12 per cent he held in the £460m Russian property company Raven Property back to the company on July 1.

Mr Woodford’s funds took a substantial loss on this sale, with stock market filings showing he received 36p per share for the stake, while the shares were trading at 49p at the start of this year. 

At the end of June, Mr Woodford cut his stake in £178m Arix Bioscience from 22 per cent to 21per cent, and Sensyne Heath, a £211m market cap biotech firm, was cut to 14.5 per cent from the previous 20 per cent.

The shares of this company have fallen from £1.87 to £1.64 over the past year. 

One of the smallest companies in which Mr Woodford’s fund was invested was Mereo Biopharma, which has a market cap of less than £50m. It has also been one of the worst performers in the fund over the past year, with the share price collapsing from £3.12 to 47p in twelve months.

Mr Woodford remains keen on the investment case for this stock however, having reduced his holding, he still owns 30 per cent of the shares. 

The smallest company in which Mr Woodford has disposed of shares lately was E-Therapeutics, a £6.7m market cap company, in which Mr Woodford reduced his holding from 6 per cent to below the declarable limit. The shares have fallen by about two thirds in the past year, from £7.50 to £2.50. 

In addition to the small cap holdings revealed above, Mr Woodford has also reduced his stake in large cap stocks AA Group to 6.9 per cent from the previous 11.9, and outsourcer Capita, from 9 per cent to below the declarable limit. 

Capita shares have fallen from £1.62 to £1.08 over the past year.

The shares of AA Group have fallen from £1.21 to 50p over the past year. 

The travails of the fund manager have not put off investors on the Interactive Investor platform however, with his Patient Capital investment trust, being the most bought on the platform in June, having been just the sixth most bought the previous month.  

The trust’s share price has fallen from 76p to 58p since the suspension of the Woodford Equity Income fund was announced a month ago. 

Fund rules mean Mr Woodford has also been forced to sell his unquoted holdings, despite those being among the best performers in the fund.

Darius McDermott, managing director at Chelsea Financial Services, said he would want Patient Capital shares to fall further before he would consider investing, due to concerns about the health of some of the companies in which the trust is invested.   

Fielding Financial Services Ltd.