Woodford Concerns

AnotherJoe

cogito wrote: »

Woodford is still insisting that he will be proved right eventually. This is the man who sold Unilever and Diageo to buy Provident and Kier.

To coin a phrase;

Well he would, wouldnt he?

MaxiRobriguez

Personally would quite like to see someone involved in politics, finance or banking come out and say "yeah I tanked it, sorry"

Seems to be the higher you go in this country the less accountability you're held to.

bowlhead99

JohnRo wrote: »

I suspect it's going to be a similar story at WPCT, very little chance of seeing a return on IPO valuation in this lifetime imho and if it does somehow come good in the foreseeable future it would require something quite spectacular to compensate the miserable performance and restore some of the reputational damage done.

I think 'little chance of seeing a return on IPO valuation in his lifetime' is unduly harsh.

For example, latest declared NAV is 87p. If we assume like some people here that the fair value is unduly optimistic because there are a couple of obvious duds, perhaps the real number is 75p (picking that number out of nowhere). So it would have to improve by a third to get back to IPO level. If there are some nice quoted or unquoted holdings in the 5-10% of NAV range which double, triple, quadruple etc in the coming years, it's not very difficult to grow by 33% in a relatively short timescale.

Of course, venture investments can go very wrong and the strategy accepts that some will inevitably turn out to be built on sand. And a problem with a largely unquoted portfolio is that we don't really have the ability ourselves to assign fair values to what it holds, as we are not close to the businesses, and most of us aren't valuation experts even if we were . Still, (although I'm biased as a holder), if they do get the fund NAV back up to £1, when you can buy it in the market at circa 60p today, that would be 67% upside - despite the portfolio 'only' improving in NAV by 33% in my example.

redux

MaxiRobriguez wrote: »

Personally would quite like to see someone involved in politics, finance or banking come out and say "yeah I tanked it, sorry"

No.

"Lessons will be learned."

This modern cliche is slyly using the language for distancing, converting the sentence from active to passive voice, and the original subject can be left out.

Johnnyboy11

bowlhead99 wrote: »

I think 'little chance of seeing a return on IPO valuation in his lifetime' is unduly harsh.

For example, latest declared NAV is 87p. If we assume like some people here that the fair value is unduly optimistic because there are a couple of obvious duds, perhaps the real number is 75p (picking that number out of nowhere). So it would have to improve by a third to get back to IPO level. If there are some nice quoted or unquoted holdings in the 5-10% of NAV range which double, triple, quadruple etc in the coming years, it's not very difficult to grow by 33% in a relatively short timescale.

Of course, venture investments can go very wrong and the strategy accepts that some will inevitably turn out to be built on sand. And a problem with a largely unquoted portfolio is that we don't really have the ability ourselves to assign fair values to what it holds, as we are not close to the businesses, and most of us aren't valuation experts even if we were . Still, (although I'm biased as a holder), if they do get the fund NAV back up to £1, when you can buy it in the market at circa 60p today, that would be 67% upside - despite the portfolio 'only' improving in NAV by 33% in my example.

But why take the risk with WPCT? Surely there are other Investment Trusts operating in the early stage space, that have a much better track record than Woodford and whose shares are also trading at a significant discount to NAV?

MaxiRobriguez

Johnnyboy11 wrote: »

But why take the risk with WPCT? Surely there are other Investment Trusts operating in the early stage space, that have a much better track record than Woodford and whose shares are also trading at a significant discount to NAV?

Sounds like a job for Johnnyboy to find them and present them here for discussion.

AnotherJoe

bowlhead99 wrote: »

I think 'little chance of seeing a return on IPO valuation in his lifetime' is unduly harsh.

For example, latest declared NAV is 87p. If we assume like some people here that the fair value is unduly optimistic because there are a couple of obvious duds, perhaps the real number is 75p (picking that number out of nowhere). So it would have to improve by a third to get back to IPO level. If there are some nice quoted or unquoted holdings in the 5-10% of NAV range which double, triple, quadruple etc in the coming years, it's not very difficult to grow by 33% in a relatively short timescale.

Of course, venture investments can go very wrong and the strategy accepts that some will inevitably turn out to be built on sand. And a problem with a largely unquoted portfolio is that we don't really have the ability ourselves to assign fair values to what it holds, as we are not close to the businesses, and most of us aren't valuation experts even if we were . Still, (although I'm biased as a holder), if they do get the fund NAV back up to £1, when you can buy it in the market at circa 60p today, that would be 67% upside - despite the portfolio 'only' improving in NAV by 33% in my example.

The trouble with the duds* are, its like looking at someones self styled collection of gold nuggets, and finding that the first chunk you pick up, quite a sizable one, going on for 10%, is iron pyrites. What are the odds the rest are also, and in fact theres little or no gold there?

* not your ordinary "failed company" duds but stonking scams in the Enron and Theranos class.

ColdIron

Hargreaves Lansdown has dropped the Woodford Income Focus fund from its £562 million HL Multi-Manager High Income fund, as withdrawals from Neil Woodford's smaller fund hit £116 million in six days.

https://citywire.co.uk/investment-trust-insider/news/hargreaves-leads-stampede-from-woodford-income-focus/a1239569

bowlhead99

Johnnyboy11 wrote: »

But why take the risk with WPCT? Surely there are other Investment Trusts operating in the early stage space, that have a much better track record than Woodford and whose shares are also trading at a significant discount to NAV?

There are not a huge number of them in the same space, especially in the 20-30% discount range, and you might already have them. I'm not saying you should buy Woodford and ignore other opportunities, merely saying that "unlikely to see a return on IPO valuation in Woodford's lifetime" sounds overly pessimistic.

One issue is fund management team incentivisation given they are a long way from being able to achieve the performance targets necessary for performance he income and if they don't have the WEIF as a huge cash cow in the background. If the Woodford operations don't deliver a decent outcome on WEIF, it may be that in due course some other management group takes over the WPCT mandate and convinces its shareholders that they would be better served with a new fee structure and motivated management team instead of just trying to liquidate the holdings in a fire sale and winding it up.

JohnRo

bowlhead99 wrote: »

For example, latest declared NAV is 87p. If we assume like some people here that the fair value is unduly optimistic because there are a couple of obvious duds, perhaps the real number is 75p (picking that number out of nowhere). So it would have to improve by a third to get back to IPO level. If there are some nice quoted or unquoted holdings in the 5-10% of NAV range which double, triple, quadruple etc in the coming years, it's not very difficult to grow by 33% in a relatively short timescale.

As a small scale holder myself I hope you're right but I'm looking at averaging down to limit the damage rather than a glorious future.

It's going to be interesting to see how WPCT holds up in the next downturn after a ten year bull market that's seen most assets and equities in particular lift by multiples, albeit from record lows. The broad biotech space has delivered a near seven fold return since the GFC from what I've read.

Admittedly that may not be entirely relevant wrt WPCT but the market backdrop to Woodford's consistently miserable performance in this trust doesn't bode well for what may yet be tougher times ahead, who knows.

I view WPCT as more of a lottery ticket than as reliable exposure to biotech startup growth.

As always time will tell.