29th May 2013
Invesco Perpertual’s star manager Neil Woodford has been discussing his portfolio and some excellent performance on his £1.3bn Edinburgh Investment Trust. He has suggested that at least one secret of his success in the last year has been avoiding mining stocks with a weighting of zero per cent as trade website Investment Week reports.
He cites the eye-watering write-downs at Rio Tinto – taking a $25bn hit from its $38bn purchase of Alcan since 2007 though he likes all sorts of stocks such as AstraZeneca and Roche and is, as this would suggest, overweight in big pharma.
With mining stocks so heavily out of favour, it will be interesting to watch the views of other fund managers as the firms try and improve their dreadful reputation. Some may even be bullish. But that isn’t the main point for Mindful Money at the moment. For those UK investors who follow passive strategies or see something like a FTSE 100 or All Share tracker at the core of their portfolio, the presence of so many mining stocks in the big indices might give some pause for thought.
First of all many UK listed miners have very limited UK exposure, if any, so they do not represent much of a domestic investment but a commodity play often linked to China – just the week the subject of an economic downgrade. They do have to subscribe to UK standards of disclosure and governance but one might argue that the UK standards of disclosure and governance could do with more than a little tightening. Given that the strange post financial crisis world has presented investors with a number of investment ‘no brainers’, it is interesting to see what buying an index gets you.
We are not saying you should definitely abandon your tracker, but there is a whole range of passive plus strategies that give you low cost exposure but with a little bit of intelligent asset allocation too. Then again, you might just buy Mr Woodford’s investment trust instead.