Neil Woodford has dropped Reckitt Benckiser (RB.) from his fund after more than decade. Over that period the share price has risen 283%.
In the Woodford Equity Income Fund monthly roundup, the management said that the shares were now too expensive to hold in their value-biased portfolio.
“We also exited Reckitt Benckiser, a share which has been present in Neil’s portfolios for over a decade,” it read.
“We continue to view Reckitt as a great business with a very strong management team and an excellent product line-up. Such a high quality business deserves a high market rating but the shares have recently become too expensive to continue to justify their position in the portfolio.”
Reckitt Benckiser Group is engaged in the manufacture and marketing of household cleaning, and health and personal care products worldwide. The Company offers fabric care products, including fabric treatment products, garment care products. It is currently yielding 2.7% and the share price has risen 56% over the last three years.
In place of Reckitt, Woodford has upped his holdings in G4S and British American Tobacco on undeserved share price weakness.
Analyst’s View by Morningstar’s Erin Lash
Reckitt Benckiser is repositioning itself as less of a household cleaning company and more as a health- and hygiene-products firm. This strategy makes sense, in our view, as over-the-counter health-care products lend themselves to greater brand loyalty, innovation, and higher margins. This increased emphasis will make Reckitt even more of a target for its much larger, stronger rivals. As a sharp operator with solid brands in some very niche categories, which is the basis for our narrow moat status, we view Reckitt's commitment to investing behind product innovation as a plus, but competitors are not sitting idly by.
It will be essential for Reckitt to ensure its products win with consumers. Reckitt is also shifting its people and capital investments to align with markets experiencing greater absolute growth, which strikes us as prudent (although Europe and North America still constitute about 50% of sales).
Beyond its consumer business, which makes up 92% of sales and 84% of operating profits, Reckitt operates a pharmaceutical division, RBP. However, after a nine-month strategic review, the firm plans to spin off the operations, which we view favourably given the lack of synergies we see.