Invesco Perpetual’s Woodford has quashed Lloyds rumour and says HSBC is investible – but what are his key stocks?

15th July 2013

Britain’s most powerful investor, Invesco Perpetual’s Neil Woodford, has trashed claims that he is gearing up to take a stake in tax-payer propped-up Lloyds.

A flurry of reports last week claimed the manager of the Invesco Perpetual Income and High Income funds, worth a combined £24bn, was set to invest in the 39 per cent taxpayer owned Lloyds Banking Group. The Daily Mail reported that Woodford was planning to snap up a 10 per cent holding in Lloyds, as Chancellor George Osborne looks to return the group to the private sector.

Woodford, widely regarded as the best fund manager in the UK, after delivering stellar long-term returns to his investors, in a blog on the Invesco Perpetual website wrote: “I have absolutely no intention of buying a stake in Lloyds or any other UK-focused high street bank at the present time and don’t expect to do so for some time.

“This is because I cannot quantify the risk of dilution through future capital raisings and remain concerned about the extent of loan losses sitting in these banks’ balance sheets, awaiting recognition in the coming years as and when they have enough capital to absorb them. This process of loss recognition still has several years to run, in my view, and the prospect of dividends from the likes of Lloyds during this process is remote.”

The fund management veteran who was earlier this year named a CBE in the Queen’s Birthday Honours list has avoided banks for some time. But in his post he asserted: “Some banks have made better progress in clearing up their balance sheets, however, having not participated as fully in the excesses that led to the financial crisis.

“HSBC, for example, is an investable asset in my opinion. The investment decision here is more a question of valuation and, with a significant exposure to Asia, being comfortable about the risks associated with the slowdown in activity that is now evident in that region, China in particular. The differences, however, between the conservatively managed, well-capitalised HSBC and Lloyds are stark.”

Woodford carries an exemplary track record, and where he invests others typically follow. In the past five years alone, his £13.6bn Invesco Perpetual High Income fund, has returned 68 per cent, against a 56 per cent rise in the FTSE All-Share. He is also known for making high conviction calls; during the technology boom, when many fund managers were recklessly over-investing in the dotcom bubble, which subsequently burst, Woodford famously eschewed the sector.

Woodford aims with both his funds to achieve income, together with capital growth by investing in companies that share their profits with investors – i.e. dividend paying stocks.

In regards to current market conditions, Woodford says: “We see more risk in markets as they have risen and have become more cautious about the near term outlook. Despite these concerns, we remain confident of the valuation and the attractiveness of the companies we are invested in and of their ability to generate positive returns over the longer term.”

Woodford is also known for investing for the long term, and has a taste for stable growing business. Investments in healthcare, industrials as well as in the consumer goods sectors represent a large portion of his portfolios. We take a look at some of his largest key holdings:

AstraZeneca

The British-Swedish multinational pharmaceutical and biotechnology giant has a market capitalisation of some £40bn and specialises in the discovery, development and manufacturing of prescription medicines. It has operations in more than 100 nations and produces drugs which tackle, among others, cancer and respiratory conditions. It was founded in 1999 through the merger of the Sweden based Astra AB and the UK’s Zeneca Group. About half of its total sales are generated from the US. Over 12 months is shares are up 12 per cent.

GlaxoSmithKline

Another pharmaceutical colossus, the UK-based group is one of the world’s leading pharmaceutical research and vaccination companies. The firm was created out of the merger between GlaxoWellcome and SmithKline Beecham in 2000 and has a range of products for major disease areas such as asthma, cancer, and virus control. It has been hit with some controversy recently as Chinese authorities have accused the group of being involved in bribery to boost sales. Over the past 12 months however, the firm which has a market cap of some £85bn, has enjoyed a share-price surge of 22 per cent

BT Group

Despite an onslaught of competition arriving in the past decade, BT remains the UK’s leading fixed line telecoms group. Rapid expansion in the late nineties, forced BT to sell off assets such as mobile arm O2. This year it goes up against BSkyB, when it launches its own sports channel, BT Sport. Over the past year, its shares are up by a huge 58 per cent.

British American Tobacco

Founded in 1902, as a joint venture between the UK’s Imperial Tobacco Company and the American Tobacco Company, BAT is second only to Philip Morris in the World cigarette market. It runs with more than 300 brands, including Lucky Strike and Pall Mall, which are sold in around 180 markets. Over the past year, its stock is up 4 per cent.

Reckitt Benckiser

The world’s largest household cleaning products group, with a market cap of almost £34bn owns a plethora of household brands including Nurofen, Strepsil and Clearasil. More than 50 per cent of its revenues come from its Fabric Care and Surface Care divisions, with the majority of its business focused on he Western Europe market, according to Digital Look. Over the past 12 months its shares have risen by a robust 33 per cent.

35 thoughts on “Invesco Perpetual’s Woodford has quashed Lloyds rumour and says HSBC is investible – but what are his key stocks?”

  1. Forbin says:

    jumped or pushed ?

    Forbin

  2. Forbin says:

    I hope that new pastures are more profitable for you Shaun, I kept the old site bookmarked :-)

    Indeed listening to all parties they seem to be set to promise allsorts of goodies for the electorate

    so the easy route is forgone conclusion

    I see clouds ahead my self ( or is that clowns ? heh! ) if we have a mild winter then energy costs will be kept low and that will help .

    Oil prices have softened but the current offset by fracking LTO will fade as the price drops to the MOL of , currently approx $68 boe. I actually expect a spike like the 2008 one in 2015 , I hope that I’m wrong but ….

    There nothing but a cigarette paper difference between the parties anyway, choose a colour thats all .

    As for any HMG party I see that more rights will be lost as we stumble onwards to a Dune-like future

    Forbin

    PS: when you vote , remember the Who ” wont be fooled again” – ” meet the new boss , same as the old boss “

    1. Anonymous says:

      Hi Forbin

      As to your question in your first comment if you are asking if I was in any way sacked no I was not and departed of my own accord. The political nut these days is a hard one to chew as whilst the main political parties promise differences what actually changes? I still believe that electing people for specific jobs like the MPC of the Bank of England is a way out of this mess.

      The oil price drop gives both lower inflation and an economic boost so let us hope that it lasts. However in 2012 we had a similar plummet followed by a stellar rise so you may yet be right.

      I have been re-reading Children of Dune and Leto II has some interesting insights for these times.

      1. forbin says:

        I’m glad its the jumped version , Shaun, I dont think mindless money had much more going for it

        certainly I will not visit their site any more and will be following your insghts on NAYME .

        please please keep up the good work !

        Forbin

        1. Noo 2 Economics says:

          You don’t rate Simon Ward’s blog then?

      2. Paul C says:

        Hi Shaun, Just noticed the latest news, the most important news which is that you are electing the lifeboat again. I hope that it is to preserve your integrityand if it is applaude you. This happened a year ago when MM had backing hiccups. Of a the blogs and audiences I enjoy yours the best so I will follow along with pop corn man. RESPEC to you Paul

  3. zummerzetman says:

    I am glad it will be business as usual on Monday on your old site. I would really miss your daily helping of insightful analysis and unique blend of humour and depressing truths!
    Still…………..The Show Must Go On – Queen

    1. Anonymous says:

      Thank you and exactly..

  4. mickc says:

    Pleased that you’ll still be blogging, your insights are much appreciated.

    1. Anonymous says:

      Thank you.

  5. anteos says:

    Great article as always Shaun.

    We truly need a new party in the uk. One which will live within it means, and make unpopular short term decisions to get us out of this mess. instead we have the wretched ukip as the protest party.

    sorry to see you leave here. looking forward to the usual high standard of journalism on your blog. keep fighting the fight.

    1. Anonymous says:

      Hi Anteos

      Thank you and just to say I have no intention of quitting especially as I think that matters are heading to a climax.

  6. Pavlaki says:

    Thank goodness you warned us about that! Fortunately I kept the old bookmark so easy to keep going – will look forward to continuity!

    1. Anonymous says:

      See you there.

  7. dannyboy says:

    Hi Shaun,

    Good post, I will go back to reading your blog at your old haunt.

    Anecdotally, I have had several conversations with my peers recently that would suggest that more people are starting to understand the problems we face. If the so called ‘crisis’ achieved anything positive then maybe it was getting a greater number of people interested in economics, so perhaps one day we as the electorate will start demanding a bit of honesty. Until then we need people like yourself to continue pointing at the inherent contradictions in our economy – something tells me you’ll be busy!

    Danny

    1. zummerzetman says:

      Most people aren’t daft, they know things aren’t right and there is a general mistrust of information from mainstream sources. From my perspective, the beauty of Sean’s blog is it cuts through the waffle and opens our eyes to the methodology behind the sham statistics.

      1. dannyboy says:

        I mostly agree with you, but I also know a lot of intelligent people who haven’t noticed anything wrong, and who probably don’t care. In my opinion the cynicism that is, as you say, so prevalent is one of the worse things to come out of the same period. Scepticism is healthy, cynicism is toxic.

    2. Andy Zarse says:

      Same as it ever was…

      Good luck Shaun, you are a beacon of truth in a murky world.

    3. Anonymous says:

      Thank you all on this mini-thread and let us hope that Danny is right that more people are becoming aware of what is actually happening.

  8. Londoner says:

    good to see you are leaving MM.
    It’s hard to see where wage growth will come from in a global economy. At least, it will have to come everywhere at the same time surely?

    1. Anonymous says:

      Hi Londoner

      Unless someone comes up with a comparative advantage of new products then yes it is an increasingly global environment. There was however a glimmer of hope from the US jobs data yesterday.

      “Over the year, average hourly earnings have risen by 2.0 percent.”

      Nothing stellar but a lot better than the 0.6% growht that the UK official statistics are reporting.

  9. JW says:

    Hi Shaun
    Will of course read you on your ‘old’ site, back in US Sunday so comments may be difficult, but always ‘log in’ for your daily dose of common sense and insight.
    Politicians daren’t tell the truth ( those few that know it) , it would be akin to saying the earth moves round the sun a few centuries ago, it would shake their very existence.

    1. Anonymous says:

      Hi JW

      Unfortunately our political class have continued to see a boom for themselves and so they see no reason for change. Jobs in devolved assemblies as well as Europe and an expanded House of Lords have seem them do well and become divorced for the fear of being voted out.

      These days the major dissatisfaction is seen in the form of independence moves like Scotland and the Catalans I think.

  10. Anonymous says:

    Hi Shaun, I’ll be heading back over to sub to your new/old blog straight away as your articles are anchored in reality unlike most of the UK press!

    1. Anonymous says:

      Thanks and see you there.

  11. therrawbuzzin says:

    Thank you for your entertaining insight into the world of economics.

    I shall continue to read your thoughts on Nayme.

    On today’s subject: official figures are unfit for purpose, and deficit or surplus is meaningless until it all goes pop!

    A song for Shaun, although an unusual version:

    http://www.youtube.com/watch?v=TDZrbTd-kZs

    1. Anonymous says:

      Hi therrawbuzzin and thank you for the song.

      I have the credit crunch to thank for becoming more of a fan of AC/DCs music. Frankly “Highway to Hell” was simply to appropriate for places like Greece! Along the way they began to get their hooks into me…..

  12. Eric says:

    Hi Shaun, Thank you for giving me a better understanding of the murky world of central bankers and economics in general. See you Tuesday (NZ Time).

    1. Anonymous says:

      Thank you and I am looking forwards to the autumn international (up here at least) with the All Blacks already

  13. Noo 2 Economics says:

    Why are you moving? I’ll see you the other side where I shall continue my notayesman posts to your notayesman blogs, only not as much – getting too busy these days despite trying to keep the workload down!

    1. Anonymous says:

      Hi Noo2

      I shall look forwards to continuing the debate…

  14. dutch says:

    keep blogging Shaun,I’ve learned so much from here and your commenters.

    1. Anonymous says:

      I intend too as I have not lost my enthusiasm for the road ahead long though it may appear to be…

  15. rdk says:

    I started reading at the old blog, came here, went back to the old blog, back here, now back to the old blog next week. You haven’t written recently about Greece, so hope to hear some insights soon.

  16. Anonymous says:

    Hi Jim M

    See you there and thanks for the song reference which I do just about remember. A bit frightening that it was 1975 though! I watched some of the Kate Bush night on BBC 4 yesterday and some of the dates of the songs were nearly as scary!

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