Woodford Patient Capital Trust (WPCT) could be one of the best-performing investment companies in 2019, according to BMO GAM’s Peter Hewitt.
Manager of the trust, which focuses on unlisted, early-stage British businesses, Neil Woodford has had a tough time in recent years. Both his eponymous open-ended funds, Equity Income and Income Focus, have struggled since launch, but Patient Capital has had an equally rough ride.
Shares in the trust went on sale in April 2015 for 100p but have fallen since. They now trade 86p, 14% below the offer price, and are on a 12.79% discount to net asset value. And earlier this month, Lombard Odier Asset Management took out a short position on the stock, which currently accounts for around 0.61% of shares in issue.
But Hewitt, manager of the BMO Managed Portfolio Growth Trust (BMPG), continues to back Patient Capital, though admitting buying shares at flotation was, in hindsight, a mistake. “I took it at issue and that was a rubbish decision,” he says.
“I now think I should have looked at the name, patient, and realised I probably could have gone away and come back three years later.”
He may not have gone away when offered the trust originally, but he has certainly come back, and revealed he recently topped up his position. Hewitt believes that if investors suspend their opinions of the manager and focus on the underlying portfolio, they will find an interesting collection of companies.
“Yes, [the discount] reflects the poor historic performance, but it also is driven by emotion. [Woodford] evokes reactions in people which are probably more negative than positive a lot of the time.
“If you strip that away and just look objectively at what’s under the bonnet, there are some bloody interesting companies there.”
Biotech firm Autolus (AUTL), the largest holding in the trust, for example, listed on NASDAQ in June this year, says Hewitt, and had almost doubled earlier this month, from $25 to $48, before pulling back slightly.
That has been one success, and there are plenty of others in the pipeline, Hewitt believes. “Since he did a big investor day in May/June, if you look at the news on Woodford it’s almost all been positive in terms of the underlying holdings.
“My feeling is for 2019 I like the Woodford fund and I think it could be one of the better performers, even if market conditions are quite difficult.”
New Mobius Trust Backed
Elsewhere, Hewitt says he has also backed Mark Mobius’s new venture, the Mobius Investment Trust (MMIT), run by Mobius, Carlos Hardenberg and Greg Koniewszy, the trio behind the resurgence in Templeton Emerging Markets.
The emerging market fund, which focuses on mid and small cap stocks with scope for improvements in corporate governance, has been popular with multi-managers, as Simon Evan-Cook recently told Morningstar.co.uk he has bought shares for his Premier Multi Asset Global Growth fund.
Hewitt explains that a liking for both emerging markets, despite recent troubles, and the management team led him to invest and he sold out of Genesis Emerging Markets to fund the purchase.
“Emerging markets have been under the cosh and have not done well, so it should be quite a good time to invest,” says Hewitt.
“I like the idea when some experienced fund managers leave a big company, set up on their own, put a lot of their own money into it. In this case, I think the chances of success, hopefully, are quite good.”
Defensive Switch
Meanwhile, Hewitt says he’s taken profits from trusts like James Anderson’s Scottish Mortgage (SMT) and Alexander Darwall’s Jupiter European Opportunities (JEO), which have performed extremely well in recent years – though they still form an integral part of his portfolio.
In their stead, he has topped up his exposure to more defensive investments like Personal Assets (PNL), BH Macro (BHMG) and RIT Capital (RCP).
“I’ve still got Scottish Mortgage and Jupiter European and I will continue to hold those trusts because I think, in the long run, their secular growth characteristics are very attractive,” explains Hewitt.
“But I’m just acknowledging where we are in the market. I don’t think we are about to have a horrible fall in markets next week or next month, but valuations, particularly in America, are now quite high.
“It’s just me saying that we have a very aggressive portfolio, I think we’re towards the end of a bull market and so I’ve built about 15% in what I call portfolio protectors, which will be defensive if we have a big fall in markets.”
