Neil Woodford’s new fund portfolio closely replicates his former holdings at Invesco Perpetual but there are also some new names on the list.
Woodford Funds today announced the top ten holdings in the Woodford Equity Income Fund, and confirmed full portfolio holdings data will be released on a monthly basis. To investors of Woodford’s former funds at Invesco Perpetual, there are many familiar names on the new list, topped by pharmaceuticals giants AstraZeneca (AZN) and GlaxoSmithKline (GSK), both of which were core holdings of the funds now managed by Mark Barnett at Invesco.
Woodford had previously promised investors that the new fund’s portfolio will feature many of the names he has held over the last 25 years at Invesco. Indeed, only two of those announced today did not previously appear in the top ten at either Invesco Perpetual Income or Invesco Perpetual High Income: Imperial Innovations (IVO) and Rolls-Royce (RR.).
Woodford Funds exclusively revealed to Morningstar.co.uk that the manager has purchased two stocks that he hasn’t invested in for a substantial length of time: retailer Next (NXT) and recently-floated breakdown service provider AA (AA.).
Neil Woodford on Monday described AA as “an unbelievably cash generative business with huge brand recognition and a strong subscription model.”
“It is quite highly indebted, but the new management team has paid down its most expensive debt using some of the money raised in the float and it looks well-placed to deliver steady long-term growth," Woodford added.
Retailer Next is a stock that Woodford hasn’t owned since 1999 and one that, at first glance, doesn’t appear to fit comfortably with his cautious outlook for the UK consumer economy. “But it is a great example of how I think a business should operate from the perspective of capital allocation,” Woodford said. “It has been an outstanding business over the past 10 years despite a very challenging consumer environment, delivering steady growth on a per share basis thanks to a very disciplined share buyback policy.” Woodford said he believes Next can continue to deliver over the next 10 years.
The new Woodford fund will be targeting a 4% yield with aims to grow the yield to a “high single digit”. Morningstar analysts recently downgraded their ratings on Invesco Perpetual Income and High Income to Neutral from Gold, and on Edinburgh Trust (EDIN) to Bronze from Gold.