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:
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.
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
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.
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.