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  • FIRST POST
    • TUVOK
    • By TUVOK 6th Aug 18, 11:22 AM
    • 38Posts
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    TUVOK
    Thought's on the Woodford equity income fund
    • #1
    • 6th Aug 18, 11:22 AM
    Thought's on the Woodford equity income fund 6th Aug 18 at 11:22 AM
    I have been slowly reducing my holding in this fund from what I once had.
    It's performance is poor now and has been for some time and barring a situation where his portfolio will soar, I am struggling to not sell my holding completely.
    Have I got my head in the sand regarding this fund or can other forum members see some light?
    Any views on this topic would be welcome.
Page 1
    • ChopperST
    • By ChopperST 6th Aug 18, 11:48 AM
    • 1,132 Posts
    • 745 Thanks
    ChopperST
    • #2
    • 6th Aug 18, 11:48 AM
    • #2
    • 6th Aug 18, 11:48 AM
    Difficult to comment without an idea of how much of your portfolio it is, timescales to drawdown etc.

    You obviously thought Woodford was going to beat the market when you bought in - has your viewpoint of him changed now - if it hasn't then why sell?

    He was beating the benchmark initially but he has made some really bad calls - Capita, Astra Zeneca and Provident to name a few....
    • talexuser
    • By talexuser 6th Aug 18, 12:45 PM
    • 2,486 Posts
    • 1,978 Thanks
    talexuser
    • #3
    • 6th Aug 18, 12:45 PM
    • #3
    • 6th Aug 18, 12:45 PM
    Same thoughts here. I bought in at 99p, so a 22% total return now is not absolutely terrible for 4 years. Still hanging on because he made me a packet at Perpetual over 20 or so years including through big corrections and my stake is small now compared to total portfolio (3%). So it all depends if we have a correction soon whether his choices are better than others, but the worry is he is so far behind now that catch up is getting more and more difficult.

    But exactly the same things have been said of him in the past before major corrections and he came through fine in the long term ahead of any comparable tracker. I do worry the alpha managers who did well in the past cannot adjust and do the same in the QE era market propped up by massive government debts and central bank permanent "emergency" interest rates boosting prices.
    • TUVOK
    • By TUVOK 6th Aug 18, 12:59 PM
    • 38 Posts
    • 3 Thanks
    TUVOK
    • #4
    • 6th Aug 18, 12:59 PM
    • #4
    • 6th Aug 18, 12:59 PM
    Yes, very much the same for me as I too made good profits from his Invesco funds.
    I have reduced my holding gradually, but I still hold 5K in his fund, I'm feeling that I should liquidate my holding more and more, the funds performance over a fairly long time has been poor with at least three bad calls.
    I've examined the companies that he holds and I get an increasing feeling that he's going no where.
    Perhaps I will be proved wrong but I feel it's time to sell.
    • bostonerimus
    • By bostonerimus 6th Aug 18, 1:24 PM
    • 2,364 Posts
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    bostonerimus
    • #5
    • 6th Aug 18, 1:24 PM
    • #5
    • 6th Aug 18, 1:24 PM
    You are in the classic dilemma faced by owners of active funds when they don't perform as well as expected. No one knows how Woodford will fare in the future so any advice is just speculation. May be you should cut your losses and sell and buy into something that's doing well like Fundsmith. But will Fundsmith continue it's impressive recent returns or will it crash and so compound your losses. Investing can be a quick way to lose money if you don't have a coherent plan to govern your buying and selling. My advice would be to avoid impulse trading and develop some criteria instead.
    Misanthrope in search of similar for mutual loathing
    • Wildsound
    • By Wildsound 6th Aug 18, 1:33 PM
    • 183 Posts
    • 115 Thanks
    Wildsound
    • #6
    • 6th Aug 18, 1:33 PM
    • #6
    • 6th Aug 18, 1:33 PM
    Same thoughts here. I bought in at 99p, so a 22% total return now is not absolutely terrible for 4 years.
    Originally posted by talexuser
    It is terrible, if you compare it against the IA UK All Companies (40%) and a fund like Old Mutual UK Mid Cap (105%) over 4 years.

    Whilst I have nothing against "star fund managers" in general, when they leave a big company like Invesco, or any other big house for that matter, you cannot expect them to replicate performance when they jump ship and join either a new house, or create their own business. The fund is not just the showman at the top, but the massive team of analysts and systems behind him.

    A few years into his new Woodford venture, you could argue that he might have the infrastructure in place to start giving something back.

    I think the lesson is, don't follow a fund manager unless you know what infrastructure is going to back him/her up. Personally, if any fund manager did similar, I would leave them to it for at least a few years before going back. That includes someone like Richard Watts (Old Mutual UK Mid Cap) if he decided to do something similar.
    • nrsql
    • By nrsql 6th Aug 18, 1:35 PM
    • 1,799 Posts
    • 608 Thanks
    nrsql
    • #7
    • 6th Aug 18, 1:35 PM
    • #7
    • 6th Aug 18, 1:35 PM
    I am hanging on in the hope that he will do well in the next major downturn which I predict will be sometime in the next 30 years - that s my best guess, I've given up trying to be more accurate than that.
    • Malthusian
    • By Malthusian 6th Aug 18, 2:20 PM
    • 4,795 Posts
    • 7,687 Thanks
    Malthusian
    • #8
    • 6th Aug 18, 2:20 PM
    • #8
    • 6th Aug 18, 2:20 PM
    I do worry the alpha managers who did well in the past cannot adjust and do the same in the QE era market propped up by massive government debts and central bank permanent "emergency" interest rates boosting prices.
    Originally posted by talexuser
    Woodford made his name during another era when everyone claimed "this time it's different" and that stockmarket / economic conditions were different to anything that had gone before. Back then it was "the Internet will change everything".

    If the star manager of one "this time it's different" era can't be expected to generate alpha during a different "this time it's different" era (bearing in mind that every single time point in history is a "this time it's different" era) then no fund manager can be expected to outperform in the long term.
    • arnhemrd
    • By arnhemrd 6th Aug 18, 2:46 PM
    • 39 Posts
    • 3 Thanks
    arnhemrd
    • #9
    • 6th Aug 18, 2:46 PM
    • #9
    • 6th Aug 18, 2:46 PM
    I unloaded 50k+ last week.

    Been torn on keeping or selling for a few months and decided, rightly or wrongly, that it had to go. Only time will tell if i made the right call.

    Undecided whether to top up my Vanguard LS 80 or put it into Vanguard FTSE Global All Cap Index.
    • cogito
    • By cogito 6th Aug 18, 3:26 PM
    • 3,646 Posts
    • 10,114 Thanks
    cogito
    I had a six figure sum in his Invesco high income fund and took half of that out when he launched Woodford Equity Income.

    After a couple of years of decent returns, I sold out of both funds because I was unhappy about the direction he was taking and his successor at Invesco seemed to be simply aping what he was doing.

    What I didn't like was the unquoted companies that became an increasing feature of his fund. To me it was like two different funds under one umbrella. My feeling is that he has lived on his past reputation for many years and is no better and possibly worse than many of his peers. He certainly doesn't seem to fully understand the nature of some of the businesses in which he is investing other peoples' money. The performance of his Patient Capital IT seems to bear this out.

    I look very carefully 'under the bonnet' of every fund I buy and avoid banks, insurance companies and extraction industries. That's why most of my money has been in the hands of Fundsmith and Lindsell Train for the past few years. I get some satisfaction when I compare the performance of those funds with Mr Woodford's.
    • OldMusicGuy
    • By OldMusicGuy 6th Aug 18, 5:00 PM
    • 582 Posts
    • 1,203 Thanks
    OldMusicGuy
    Already quite a long thread on this, see here: https://forums.moneysavingexpert.com/showthread.php?t=5772369&highlight=woodford

    I sold my six figure Income Focus holdings earlier this year. Woodford convinced me to go all passive.
    • talexuser
    • By talexuser 6th Aug 18, 8:38 PM
    • 2,486 Posts
    • 1,978 Thanks
    talexuser
    against the IA UK All Companies (40%)
    Originally posted by Wildsound
    According to Morningstar it is actually 34%, exaggeration doesn't help, nor comparing apples with oranges. I'm not defending Woodford at all, just meant it is better than flat or negative, and could well be the time to get out - or the time to pile in! In a balanced portfolio he might contribute at a different time as he has done in the past, or he might not. He was actually 40% ahead at one time and dropped 20% the past year or so with bad calls. You take your punt and make your choices.
    • Thrugelmir
    • By Thrugelmir 6th Aug 18, 10:55 PM
    • 60,096 Posts
    • 53,437 Thanks
    Thrugelmir
    From a neutral viewpoint. Some interesting holdings. Purple Bricks has huge potential . Likewise Imperial Brands is a core income generator. With increasing numbers of investors chasing the same stocks higher. There's room for the nimble footed to take advantage of mispricing.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • cogito
    • By cogito 7th Aug 18, 6:46 AM
    • 3,646 Posts
    • 10,114 Thanks
    cogito
    There's room for the nimble footed to take advantage of mispricing.
    Originally posted by Thrugelmir
    Which amongst us amateurs is nimble footed enough to know when a share is mispriced? None of us has access to the information available to the pros to be able to get ahead of the game. That's what we pay fund managers for as we can figure out, within reason, who are the better ones.
    • cogito
    • By cogito 7th Aug 18, 7:20 AM
    • 3,646 Posts
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    cogito
    . Likewise Imperial Brands is a core income generator.
    Originally posted by Thrugelmir
    Imperial Brands share price is down 13.5% over the past three years. It may be a core income generator but why would you want income at the expense of capital growth.

    Terry Smith on Imperial:

    In the letter to shareholders, Smith explained the rationale behind the sale of his stake in Imperial Brands (IMB +
    ), the tobacco company he has held since the launch of his flagship fund more than seven years ago.

    Smith sold the stake in November last year and said he had become worried about the positioning of the cigarette company, formerly known as Imperial Tobacco.

    'We had become increasingly concerned about the company's positioning in terms of its lack of exposure to the developing world and to the next generation reduced risk products such as heat-not-burn devices, all of which has led to volumes falling at a rate it is difficult to cope with,' he said.

    'We were even more concerned by the management reaction which we literally could not understand.'

    Imperial Brands reported a 4.1% decline in volumes in its 2017 financial year, as it announced small-scale trials of products that heat, rather than burn, tobacco.

    But that came too late for Smith, as the company trails rivals such as Philip Morris International (PM.N), a top 10 holding for Fundsmith, whose heat-not-burn product is awaiting approval from the US Food and Drug Administration following successful roll-outs in Japan, Italy and Switzerland.

    Smith's sale is all the more significant given his investment philosophy, which emphasises minimal portfolio trading and holding companies for the long term, and his enthusiasm for tobacco companies.

    The manager has long argued that increasing government intervention in the sector, including bans on advertising and marketing, had served to strengthen its investment case, by effectively protecting existing companies given the large barriers to entry for new firms.

    Smith's stance on Imperial Brands meanwhile puts him at odds with Woodford, another longstanding backer of tobacco companies.

    Woodford has sold a number of tobacco companies from his LF Woodford Equity Income +
    fund, such as British American Tobacco (BATS +
    ), Philip Morris International (PM.N) and Altria (MO.N), but has kept Imperial Brands as his top holding.

    Imperial Brands was one of only two companies in Smith's concentrated portfolio, currently comprising 27 stocks, to lose him money in 2017.


    Who would you back? Smith or Woodford?
    • Johnnyboy11
    • By Johnnyboy11 7th Aug 18, 9:47 AM
    • 41 Posts
    • 33 Thanks
    Johnnyboy11
    Of concern to me is that Imperial Brands is 9% of Woodford Equity Income's holding. That's a lot more exposure to one company than I'd expect when buying into such a fund.
    • AnotherJoe
    • By AnotherJoe 7th Aug 18, 8:42 PM
    • 10,972 Posts
    • 12,666 Thanks
    AnotherJoe
    Which amongst us amateurs is nimble footed enough to know when a share is mispriced?
    Originally posted by cogito

    Me? I've made a lot of money over the years by picking the right companies. (I've also missed some and I've had spectacular misses as well) but its not hard if a trend starts happening in an area you work in or are knowledgeable in, to get ahead of the big fund managers.



    And by mispriced, what i mean is, not allowing at all for future trends. They can certainly read the accounts better than I can but accounts are backward looking and dont account for say a 100-fold increase that you may "know" is coming but analysts / fund managers are frankly too dumb to know or understand. I was buying Apple shares well before Carl Icahn, Warren Buffet and probably 99% of investment managers. As were many other "little investors" . Not that I'm a genius, i missed Amazon completely, and Tesla, and i can argue i should have spotted Amazons potential.



    None of us has access to the information available to the pros to be able to get ahead of the game. That's what we pay fund managers for as we can figure out, within reason, who are the better ones.
    Originally posted by cogito

    Fund managers, despite their massive teams and supposed knowledge can often be blind to forthcoming trends and paradigm shifts and miss them altogether either by sticking with current companies for too long or not picking the new entrants. Given the subject of this thread, Woodford has made some absolute recent clangers in stock selection.



    And on the subject of those in the know , I recall reading an analysis of Kodak in something like the Economist or Business Week, in the year before its shares fell off a cliff when digital "happened", recommending the company as a solid investment that had a

    plan for the future. The so-called experts had completely missed the paradigm shift that was digital that was only a year or so away.



    There are plenty of other examples of the "experts" being at least as wrong footed as the "average investor" and much less well-informed than those in the area through work or a hobby or some other personal knowledge. Certainly for companies i invest it, I cant even count how many utterly dumb analyst reports I've read on companies that completely miss the mark and often they've provided a great buying opportunity. Which is why over time I've been transitioning to index funds because i have little faith in most managers. Terry Smith I'm currently sticking with and SMT but i dont have many active funds any more.
    • AnotherJoe
    • By AnotherJoe 7th Aug 18, 9:36 PM
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    AnotherJoe
    Wow. So just to add to my comments above
    There are plenty of other examples of the "experts" being at least as wrong footed as the "average investor
    , and since I mentioned my missing Tesla as an opportunity though no reason i should have i dont follow the motor industry) , there are some so-called experts out there that run multi-billion $ hedge funds looking very very stupid right now as Elon Musk talks about taking tesla private at $420 a share.

    You'd think that experts who had billions of dollars under management would be super smart and not get caught out like this ?These guys (two in particular, Einhorn and Chanos) are quite possibly going to lose literally tens of billions $ over the next few weeks.
    • cogito
    • By cogito 8th Aug 18, 6:53 AM
    • 3,646 Posts
    • 10,114 Thanks
    cogito
    Wow. So just to add to my comments above , and since I mentioned my missing Tesla as an opportunity though no reason i should have i dont follow the motor industry) , there are some so-called experts out there that run multi-billion $ hedge funds looking very very stupid right now as Elon Musk talks about taking tesla private at $420 a share.

    You'd think that experts who had billions of dollars under management would be super smart and not get caught out like this ?These guys (two in particular, Einhorn and Chanos) are quite possibly going to lose literally tens of billions $ over the next few weeks.
    Originally posted by AnotherJoe
    He is only talking about it at this stage. It might be nothing more than a shot across the bows but I don't blame Musk for considering going private. His business is currently fair game for hedge funds looking to make money without actually contributing anything to the development of the company and arguably damaging its prospects.
    • AnotherJoe
    • By AnotherJoe 8th Aug 18, 7:08 AM
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    AnotherJoe
    He is only talking about it at this stage. It might be nothing more than a shot across the bows but I don't blame Musk for considering going private. His business is currently fair game for hedge funds looking to make money without actually contributing anything to the development of the company and arguably damaging its prospects.
    Originally posted by cogito
    Yep, all true. My possibly badly expressed point was, none of the super duper researched up to the eye balls, so called financial experts, saw this one coming and it could cost them so much, it bankrupts their companies. Yet these guys are mean to be, to use the title of an awesome documentary on Enron, The Smartest Guys in the Room and surely so much better researched than us little guys that how coudl they be wrong ?
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