Woodford Patient Capital Trust

Linton

bostonerimus wrote: »

If you use an active fund you are betting that it will be one of the one's that beats it's comparable index. I expect people used Woodford's past success as at least one of the criteria for investing In his Capital Trust.....I hope it wasn't the only one. I feel a bit sorry for Woodford as his losses are pretty short term so far and in a decade he might have done quite well. If people bought into this fund fro sound allocation and strategic reasons then this decline is a buying opportunity. Those that sell will have committed the cardinal sin of investing; buying high and selling low. Of course if you wait any longer your losses might get bigger. Such difficult decisions can be avoided if you have the correct asset allocation for your strategic goals and you use the discipline of rebalancing to buy and sell.

Err, which index would you suggest would be comparable with Woodford Patient? Its difficult to conceive of an index of unquoted shares.

digannio

I know the investment purists don't like it but the fact is there are rafts of people out there who will have made the decision to invest because in their eyes Woodford = can't lose. And there are a lot who think the same way about Terry Smith and the "life-changing" returns from Fundsmith. Can't lose. Just look at the inflows.

The string of WPC stock-specific issues that for some have sent their investment down from £1 or £1.20 to 82p has come as a shock. This wasn't in the Woodford script.

One of the criticisms I have read from investors surrounds Woodford's decision to have a massive 17.5% in just one stock, Prothena, which has a lot of doubts surrounding it.

Woodford always has stressed "long-term" but the trust's three-year anniversary arrives in three or four months and the clamour for some good news is getting louder. Patience seems to be in short supply.

Linton

digannio wrote: »

I know the investment purists don't like it but the fact is there are rafts of people out there who will have made the decision to invest because in their eyes Woodford = can't lose. And there are a lot who think the same way about Terry Smith and the "life-changing" returns from Fundsmith. Can't lose. Just look at the inflows.

The string of WPC stock-specific issues that for some have sent their investment down from £1 or £1.20 to 82p has come as a shock. This wasn't in the Woodford script.

One of the criticisms I have read from investors surrounds Woodford's decision to have a massive 17.5% in just one stock, Prothena, which has a lot of doubts surrounding it.

Woodford always has stressed "long-term" but the trust's three-year anniversary arrives in three or four months and the clamour for some good news is getting louder. Patience seems to be in short supply.

Three years is extremely short term in investing. If people were requiring good results in 3 years they should never have been investing in shares at all. It's not the stock specific issues that have caused the Trust price to fall significantly, it's the potentially transient impatience of the purchasers. Woodford couldnt have been clearer when he named his fund.

JohnRo

He's investing in sectors which are doing very well, unlike his trust, that's the problem.

bostonerimus

Linton wrote: »

Err, which index would you suggest would be comparable with Woodford Patient? Its difficult to conceive of an index of unquoted shares.

True for this Woodford fund, but not for many other active funds. Comparisons are always tricky, but people make them nevertheless. Right now Woodford Investors are presumably comparing his funds performances against those of other "star" managers and the funds in year end "best" lists probably without much attention to whether it's a particularly valid comparison. If the less than stellar NAV performance of his closed end fund is causing investors to flee, then presumably the discount is going to increase which is an example of the way the closed end structure can amplify losses. People need to understand what they are investing in and understand the risks........I'm dumb so I stick to open ended index funds that I can easily rebalance and avoid these problems. My question to the Capital Trust's investors would be "why isn't this a buying opportunity?"

traineepensioner

digannio wrote: »

Down another 3% today, discount pretty much 9.5% and available at 82p today. TheWoodford blog seems to be filled with people who are no longer Patient after a series of big setbacks. Just wondered if anyone is tempted... someone placed a £367,000 buy late this afternoon but there seems to be plenty getting out as well.
Surely the great Woodford won't let his legion of Patient followers down long-term, will he?

Just bought some more, not a massive amount though. I'm just doing a little rebalancing to counter gains from other funds. Rightly or wrongly I'm in it for the long term.

Thrugelmir

bostonerimus wrote: »

My question to the Capital Trust's investors would be "why isn't this a buying opportunity?"

Why isn't it a selling opportunity?

Markets only function because people hold contarian views. Price movements depend on who holds the upper hand. People looking to sell or people looking to buy. If a large line of stock is sold, as today, over 207,000 shares. Then may take a while to be digested.

With equities more or less the only place to be with Central banks continuing to pump liquidity into the financial system. Huge complancy abounds as to the future direction of markets. Little point in chasing prices upwards. While companies continue to underperform market expectations and the number of profit warnings grows. Something of a disconnect.

Plus

Linton wrote: »

Three years is extremely short term in investing. If people were requiring good results in 3 years they should never have been investing in shares at all. It's not the stock specific issues that have caused the Trust price to fall significantly, it's the potentially transient impatience of the purchasers. Woodford couldnt have been clearer when he named his fund.

One of the risks I identified with this fund is the 'Patient' slogan. It gives the ultimate getout clause for poor performance - any complaint can always be rebutted with 'oh, you're just not being patient enough'.

To analyse whether that's true, we should also look at the holdings. Some of the pharma stocks are basically one-trick ponies: if they get a licence for their drug, they are instantly worth something (as acquisition material) and might make it bigger on their own by being Patient. If the drug trials show it doesn't actually work, they have nothing of value and go under. In that circumstance no amount of Patience is going to make them worth something.

I was deeply unimpressed by his investment in Industrial Heat, which is basically snake oil. Maybe VC investments have a 1% chance of making it big, and it's worth playing the numbers game investing £1m each if you're going to earn £200m from the one that does. But if the investment has no prospect of working this is merely £1m down the drain.

There are other companies that have a proven product and need an investor in for the long haul to allow them to develop it. I haven't studied Purplebricks in detail, but it seems a better fit with this idea.

In summary, Patient is not the same as 'extremely speculative'.

Thrugelmir

Plus wrote: »

Maybe VC investments have a 1% chance of making it big, and it's worth playing the numbers game investing £1m each if you're going to earn £200m from the one that does.

3i use to work on the basis of 1:20 companies providing a sizable return. Exit would be after a minimum of 5 years. Either through a trade sale sale or market listing. Another 3-4 would be acceptably profitable. Another 5 or so would at best break even. The remainder probably wouldn't survive in the longer term.

A return of £200m on a £1m. Is sheer pure fantasy. Nor is a scatter gun approach sensible. There's no shortage of entreprenuers seeking finance. Finding the right opportunities to invest in is hard graft.

Plus

Thrugelmir wrote: »

A return of £200m on a £1m. Is sheer pure fantasy. Nor is a scatter gun approach sensible. There's no shortage of entreprenuers seeking finance. Finding the right opportunities to invest in is hard graft.

For clarification, this was merely an illustrative example - I'm not suggesting these numbers are accurate. Merely that a company that claims its product defies the laws of physics has no hope of being a good investment, however much or little cash you put into it.