At Woodford, we feel strongly that existing and potential investors are entitled to understand what we’re doing with their money.
Understanding our long-term, disciplined and diligent investment approach is crucial in helping clients to decide whether investing with us would be right for them and to understand how their investments are being managed and the experience they can expect with Woodford.
First and foremost we are stock pickers. We combine rigorous fundamental analysis of companies with our perspective of the long-term macro-economic outlook and variables and how these might impact existing or potential holdings. This approach allows us to construct robust investment rationales and make informed decisions. We focus on what matters: the long term and the fundamentals.
An active strategy
We believe that being an active investor means doing something different from the market and adding value through the investment process.
Every investment we buy, we buy on merit – we never invest in companies to make our portfolios look more like the index. As a result, our portfolios tend to look and behave very differently to the general market. We are happy for our performance to be compared to the market (and our portfolio activity and performance are fully disclosed on our website) but we are confident that we can better it over the long term by doing things differently.
We are also active in our engagement with company management teams, as we want to represent our investors’ best interests in our discussions with management teams. We aim to ensure that management is aligned with shareholders and that the course set for the business will create long-term shareholder value. We engage with management to try to influence change where necessary. Successful investment requires a partnership between managers and owners.
Our long-term approach to investment management is encapsulated in a patient capital investment style.
Equity markets take a random walk on a daily basis. The forces of fundamentals and valuation may be over-ridden by sentiment and the whim of the market in the short term, but it is the longer time periods that count. We look beyond the short-term noise and focus on the long-term drivers of share prices.
Our approach is focused on value discovery, not on price discovery. We believe that by focusing on valuation and identifying companies that can deliver sustainable growth, today or in the future, we can deliver great long-term outcomes for our investors.
We believe investors expect a return. We don’t think we’ve done a good job if a fund falls in value, even if the market has delivered an even worse outcome. Protecting our investors’ capital is key.
Our approach is all about positive return over the long term. We do not pay attention to hype and we are not distracted by the desire for instant results. Instead we seek well-run, high-quality businesses – the fundamentals matter and Neil’s ability to make investment decisions that balance macro-views, business specifics and his view on management teams have resulted in exceptional long-term performance.
Of course value is not a product of history but of the future and that is why Neil and the Investment team continue to adopt their disciplined, diligent and focused methodology to spot opportunities and create positive outcomes for our clients.
In the case of younger businesses, investors do have to tolerate the prospect of loss on a stock-specific basis, although our due diligence efforts are designed to minimise this risk. We aim to achieve capital preservation through diversification, by investing in a larger number of smaller positions.
We acknowledge that there will be periods when a fund falls in value but we believe our disciplined strategy, with a focus on valuation and diligent stock picking, can help us prevent any temporary losses of capital becoming permanent. We focus on absolute risk and on delivering a positive return over the long term.
What matters to our clients matters to us and our sole focus is on delivering robust and reliable performance for investors.