Woodford Concerns

AnotherJoe

bowlhead99 wrote: »

If I don't have to sell it in 3 months to pay you back your loan, I don't need to line up a buyer tonight, so I don't need to take the first offer of 50p for it. Whereas if you are going to enforce some arbitrary condition like I need to 'flip it' in 3 months, I would want to pay less, because when disposing it I would be a distressed seller, and would not achieve fair value.

Surely the value should reflect what it could be sold for within a few months?

However, if I held it already and didn't need to sell it in the next 3 months, and accounting standards told me to value it at fair value, maybe £50m is fine. I don't know what it is worth to an arm's length buyer as I am not party to the original investment thesis nor the strategic plans of any potential acquirer, and have not seen the business plans or any accounts. Yes I know you know it is worth £0 full stop.

Not my point BH. My point was, it's clearly not worth what Link have valued it at if you wouldn't even buy it at 70% of their valuation. If it was an office building or shares in say Apple or BP I bet you'd pay 70% the valuation.
If it's really worth £70m why isn't NW selling it right now ? Of course he may be but I bet you a tenner it's still in there by end this year (assuming the fund it still open then) and valued even lower than now because no one else, probably not even Link, believe that valuation either.

I reckon Link will halve their valuation again in a few months (by mid December) and then write it down to next to nothing a few months after that (again, assuming the fund is still open, which I doubt) , perhaps flogged to someone like a holywood celeb who wants a tax write off, shortly thereafter quoting "insurmountable technical difficulties" or "issues keeping to the previous published schedule" as to why it didn't pan out.

bowlhead99 wrote: »

I think it is likely to be worth a lot less than Woodford paid for it.

So that means at most around £30M pounds yet Link have valued it, this week, at £70M.

So you dont believe Links valuation either.

p.s. as teh rest of his holdings turn out to be worthless junk, the % of IH at its £70M valuation that makes up WPCT keeps rising. Its got to be getting on for 15% now ? Is there a % limit for holding any one investment?


Probably the only reason NW hasnt been kicked out by now (and the useless board) is, why would anyone take this pile of steaming ordure over?

bowlhead99

AnotherJoe wrote: »

Not my point BH. My point was, it's clearly not worth what Link have valued it at if you wouldn't even buy it at 70% of their valuation. If it was an office building or shares in say Apple or BP I bet you'd pay 70% the valuation.

If it was a liquid asset such as £50m of BP shares, that could be easily flipped within three months, I would be quite happy to buy it at 70% of FMV with free loan finance, and flip it at greater than 70% of FMV within three months. An office building is much less liquid making the risks are greater but if I'm selling at 25% discount I could probably get rid of it in the three months with a small profit.

As we both know, IH is not a liquid asset, so the fact I wouldn't buy it at a 'discount' to flip quickly does not say anything about the validity of the FMV.

As I said in my previous post, "for someone who only has a few hundred grand of net worth: borrowing £50m from Joe with a requirement that you buy a research company and flip it on within three months because you have to pay the £50m back in that timescale, would be bonkers, even if the research company might be worth a present value of £100m to you if you'd been able to keep it for decades.". Unfortunately I don't have the line of credit to allow me to keep it for decades, so to me, I couldn't pay £50m or £100m for it, as I can't extract the (for example) £50-100m value within 90 days.

If it's really worth £70m why isn't NW selling it right now ? Of course he may be

Well,
(a) if he is holding it in a closed ended vehicle he doesn't need to sell it right now. You don't sell something just because it has a value.
(b) as you say, he may be, but such things take time.

p.s. as teh rest of his holdings turn out to be worthless junk, the % of IH at its £70M valuation that makes up WPCT keeps rising. Its got to be getting on for 15% now ?

You refer to a £70m valuation but it is valued in the WPCT books at probably less than £50m, unless you can point me to a different number based on some public info?

The post-revaluation NAV has not been published yet but if the IH revaluation impacting NAV by -3.4p is the only movement from Thursday's NAV of 78.6p, the NAV would move to a value of ~75p or £680m. There may well be other revaluations, so perhaps £650-700m.

As the <£50m valuation of IH is only 7.2 to 7.7% of a £650m to £700m NAV, this is nowhere near the 'getting on for 15% now'.

I don't particularly care that you think the NAV of (say) £680m is overstated. Perhaps a £50m valuation would be 15% of your valuation, but nobody assessing concentration limits is going to say, "oh look this one asset seems to be approaching an arbitrary 15% of Joe's arbitrary valuation".

Is there a % limit for holding any one investment?

The investment policy for WPCT only allows for an investment purchase in any one company to be up to 10% of NAV measured at the time of the investment.

It doesn't matter if an investment is bought and later goes over that limit due to value growth or fund NAV decline. Also, a follow-on investment in an existing portfolio company is subject to a higher, 20% limit (again, at time of investment). Also, the concentration limits are measured against reported NAV, not AnotherJoe's personal assessment of NAV.

aberlyfid_2000

we can all wax lyrical here but the fact remains, woodford and his funds have been an unmitigated disaster

jamei305

I suppose it's easy to make multi-decade punts and ask your investors to be patient when you're 59 and someone else will be asking investors to just be patient for a few more years while you're putting your feet up retiring on the fees you've earned for investing other peoples money in said companies.

Why would anyone invest in a "patient capital" vehicle with just one bloke's name attached to it?

Aminatidi

jamei305 wrote: »

I suppose it's easy to make multi-decade punts and ask your investors to be patient when you're 59 and someone else will be asking investors to just be patient for a few more years while you're putting your feet up retiring on the fees you've earned for investing other peoples money in said companies.

Why would anyone invest in a "patient capital" vehicle with just one bloke's name attached to it?

There's a reason he put his name to it.

Ask most people to name a UK fund manager and other than the likes of you and I who are on here I'll bet most could only name Woodford.

gadgetmind

Go back a couple of years and Woodford was being hailed as proof of active investment and the man who could do no wrong. Passive investors suggesting that "hot hands" were a myth and that reversion to mean was inevitable, were pointed in the direction of Woodford as proof they were wrong. Pointing out that these people had previously use Bolton as their "can't go wrong" hero a few years earlier didn't seem to sway them.

I wonder who will be next?

gadgetmind

This is worth a read. Note it was written in March 2018 when Woodford was struggling but hadn't yet totally blown it.

https://moneyweek.com/485293/the-star-fund-managers-who-fell-to-earth/

Prism

One thing to keep in mind is that although fund managers don't tend to change their style, investors in those funds can whenever they want. Anyone with much sense who was invested with Woodford from the Invesco should have got out a few years ago - or at least decrease their exposure to what was becoming a high risk fund. This is one example where the manager seemed to change style

If the quality style of Fundsmith, LT and others begins to underperform (though I'm not sure it would especially) then an investor can always change fund. If those managers begin to change their style then either don't invest or again make a decision .

aroominyork

Prism wrote: »

If the quality style of Fundsmith, LT and others begins to underperform (though I'm not sure it would especially) then an investor can always change fund. If those managers begin to change their style then either don't invest or again make a decision.

It's not only a change in style (like Woodford) that can lead to underperformance, it can also be a change in geography. Terry Smith follows a similar style in FEET as in Fundsmith but it isn't working well.

Edit. Just seen the article in gadgermind's post #1038 makes a similar point.

eskbanker

aberlyfid_2000 wrote: »

we can all wax lyrical here but the fact remains, woodford and his funds have been an unmitigated disaster

Yes, there are way too many useful and informative posts on this thread, what it really needs is some glib platitudes!

:wall: