Is it Time to Dump Woodford?

Woodford Equity Income has taken a hit this year, with top holdings suffering significant losses. Is the star manager losing his touch or is this just a bump in the road?

Jorge Marques 27 September, 2017 | 9:01AM
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Investing personalities are often subjected to the age-old question: Is it skill or is it luck? From Warren Buffett to Neil Woodford, periods of underperformance often coincide with bad luck and harsh criticism regarding the alpha they can provide. In this regard, investing in valuation-driven, high conviction managers becomes more complex than it needs to be, as many investors pull out of a fund at the earliest sign of underperformance. Instead, we advocate investors maintain clear expectations and be prepared for certain periods of volatile performance.

In a recurring theme, the critics are back. Profit warnings among some of the more prominent UK companies have caught high-profile investors such as Neil Woodford off guard. One of the most distinct companies has been Provident Financial (PFG), which announced in August its second profit warning for 2017.

The subprime lender revealed further stress on its consumer credit division, which is now forecasted to post profit losses in 2017. Additionally, the company unveiled an FCA investigation on a repayment option plan product offered by the division. The stock price dropped 68% on that day.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
AstraZeneca PLC8,314.00 GBP0.00Rating
British American Tobacco PLC2,561.50 GBP0.00Rating
LF Equity Income C Sterling Acc3.39 GBP0.00
Provident Financial PLC361.00 GBP0.00

About Author

Jorge Marques  is an Analyst for Morningstar Investment Management