This time last year we took a look in the rear view mirror to analyse the performance of the CF Woodford Equity Income Fund and the UK stock market as a whole over the course of 2015. Here, we do the same for 2016.
The fund delivered a modestly positive total return in 2016, but fell short of our aspiration to deliver high single digit annualised returns to investors. Clearly, that is a long-term aspiration and this was just one year in a multi-year investment strategy, but nevertheless, for a variety of reasons which we aim to explain below, the fund’s performance in 2016 was disappointing.
Importantly, however, we have seen considerable fundamental progress made across much of the portfolio which, given the prevailing market conditions, has not yet been reflected in share prices. You can hear more on this subject in our video of Neil below.
Neil Woodford on 2016 and his 2017 outlook
Neil reflects on why 2016 reminded him of the challenges he faced at the height of the technology bubble as momentum, not valuations, drove share prices – a reason he enters 2017 in a confident and optimistic mood. He also explains how momentum-driven markets test the resolve of active fund managers and their investors but why they always represent the best opportunity to add long-term value.
We have always been clear that the fund is very actively managed and at times, will not look or behave like the broader UK stock market – since launch, investors have seen the benefit of such an active approach but 2016 saw some of the fund’s prior outperformance unwind. That said, it’s worth spending some time looking at why the fund underperformed the broader FTSE All Share index in 2016.
Much of what we saw in 2016 does not appear to be grounded in fundamentals. In the long run, fundamentals are all that matter for share prices, but over shorter periods, they can be overtaken by other drivers, such as sentiment and momentum. That appears to have been the case in 2016 – as the chart below demonstrates, market leadership has become increasingly concentrated in a handful of stocks, most of them commodity-related.
Now you could argue that the performance of the oil & gas and mining sectors has been justified by fundamentals, given the increase that we have seen in commodity prices over the last twelve months. We are not convinced by that argument, however. Perhaps these sectors (and the commodity prices upon which they depend) fell further than they needed to in 2015 but the recovery since then, in our view, goes way beyond what fundamentals would justify, particularly when you consider that many key commodities remain structurally oversupplied and the global demand outlook is still very poor.
Let’s take Royal Dutch Shell, as an example – in sterling terms, the price of its B shares rose by more than 50% in 2016, presumably in response to the recovery in the oil price. However, despite the higher oil price, consensus forecasts for its earnings per share in 2016 declined by 34% as the year progressed. The market clearly chose to ignore these downgrades, but the combination of a higher share price and lower earnings forecasts has led to a more than doubling in its PE ratio, from 12x earnings to 27x earnings in the process (source: Bloomberg on a capital return basis).
This is an extreme example and, obviously, Shell’s share price may have responded to many other things besides the outlook for earnings in 2016. Nevertheless, a similar pattern is evident across many other commodity-related stocks and, in aggregate, given the fund’s continued absence from these parts of the market, this has been the source of a significant part of the fund’s underperformance.
As the chart above demonstrates, however, the fund did not keep pace with the broader market, even if we strip out the impact of these index heavyweights. The fund’s performance has also been impacted by adverse share price performance from some parts of the portfolio – some of this is linked to negative fundamental developments but, importantly, much of it is not.
One stock stands out as a poor performer and it has also been the source of a lot of questions from our investors in recent weeks. Capita was a big position in the portfolio as we entered 2016 and its share price more than halved over the course of the year. A series of disappointing trading updates in the latter part of the year have completely undermined market confidence in the business, and indeed, the credibility of management forecasts.
We have been disappointed and surprised by the apparent vulnerability of Capita to the weak trading in its more cyclical divisions (which are a small part of the overall business). The impact of this trading weakness has been exaggerated by a perception that, as profits have fallen, the company’s balance sheet has become stretched.
Management has announced the disposal of its asset services division, which should help to address these balance sheet concerns. Furthermore, we believe the market has over-reacted to the series of profit warnings. In our view, the share price now profoundly undervalues the fundamental long-term attractions of this business. At times like this, it is essential that one does not compound the impact of a fundamental disappointment through an emotional reaction to a share price fall. We recognise that it will take time to rebuild credibility and value at Capita, but we are prepared to be patient.
There were some bright spots elsewhere in the portfolio. Shares in Burford Capital – a young litigation finance business and a great example of the benefits of our patient capital investment approach – more than trebled in 2016, as the market finally started to acknowledge the value that has been created by its impressively astute management team in recent years. Our tobacco holdings also delivered a positive contribution to performance for most of the year, albeit some of this was eroded in the final quarter as the momentum-driven market conditions intensified.
Regular readers of our blog have also asked why we continue to be overweight in healthcare. It’s a sector that we believe offers investors an exceptional opportunity not least because of its attractive fundamentals. The industry is becoming more incentivised to bring forward innovative treatments that address the heavy burden of healthcare costs on the economy. As a result, we see a lot of value being stored up in the sector and there are some very promising drugs coming through from the pipelines of both small biotech and large pharma companies. Going forward, as a result of the market’s failure to acknowledge this progress over the last eighteen months, it is plausible that value starts to be recognised in the form of more M&A activity in 2017. Consequently, we believe that there is considerable long-term value within the healthcare sector and we have positioned the portfolio to capture this opportunity. We will be writing in more detail on the attractive fundamentals of the healthcare industry in the near future.
In conclusion, despite the challenging market conditions we have witnessed and some surprising political events, nothing we saw last year persuades us that the portfolio should be positioned differently. The narrow momentum-driven rally that we have seen has added risk to certain parts of the market. In particular we continue to avoid the oil & gas and mining sectors where, despite the rally in commodity prices, dividends are still vulnerable and the fundamental backdrop for prices remains weak. This positioning was unhelpful in 2016 but we’re convinced it’s still appropriate to avoid them.
Instead, the portfolio remains positioned towards attractively-valued businesses with significantly more control over their destiny. This control, generally speaking, has delivered some considerable positive progress in 2016 and this progress will ultimately be reflected in share prices, when fundamentals reassert themselves as the predominant influence of share price behaviour. As such, we look forward to 2017 and the years beyond with great confidence.
Standardised performance (%)
01/01/12 to
31/12/12
01/01/13 to
31/12/13
01/01/14 to
31/12/14
01/01/15 to
31/12/15
01/01/16 to
31/12/16
CF Woodford Equity Income (C Acc)
–
–
–
16.19
3.19
FTSE All Share index
12.30
20.81
1.18
0.98
16.75
Past performance cannot be relied upon as a guide to future performance.
Source: Morningstar Direct on a total return basis, with net income reinvested.
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I have decided during the year to sell my holding in the fund for the following reasons:
– Capital preservation is important, many smaller holdings are down double digits, many smaller plays are down 30% or more, if there was true value in these smaller caps why would they be down by so much. Not just biotech plays are down other plays also.
– I am surprised that Woodford is surprised at Capita results & performance, wasn’t Brexit something you said would have no effect on the economy, well companies will hold back investment during uncertainty of Brexit and outsourcers get hit, so very surprised that you were surprised by this.
– You speak about fundamentals being unchanged post Trump, but really this is post Brexit, little mention of that, possibly because you called this so wrong. There will be an impact to companies earnings and we/you have no idea how this will affect performance. We have to wait for years for this mess to be cleared up and new trade deals put in place but hey you pretty much advocated for it, so no excuses from Woodford funds. I did hear about Woodford thinking about launching a global fund, guess you’re thinking along the same lines as me – more opportunities globally than in the UK post Brexit.
– Woodford funds have described the level of defensiveness in the fund so when the market falls the fund would typically fall less, however this has proven to be untrue over the last year, so not true in all cases. Woodford fell further during down periods then was unable to catch back up, the opposite of a defensive fund. Bond yields increasing cannot be blamed as other quality (bond yield) funds performed very well indeed.
– Woodford funds have put in place a dollar hedge, most likely at the 1.25 point, this was a mistake, the govt has no credible plan we could be down to 1.15 from here, no one knows, I’d prefer you to stick to company analysis vs something which is totally out of your control. The hedge has also held back performance recently as we are now at about 1.21.
– Also surprised Woodford went for Next close to all time highs was clear where trend was heading after first leg down, is now cheap and a value stock at £40 with high ROCE but with no growth isn’t going anywhere fast.
– After the listing of WPCT at offer of 200 mill then expansion to 800 mill it seemed pretty clear this was only about assets under management vs returns for shareholders. This was confirmed when another round of fund raising was being looked into. Correctly, Woodford funds decided not to pursue that opportunity. I have also sold my holding in WPCT as the strategy seems unproven at this stage, I prefer a sure thing, I’d be surprised if you earn a fee with that fund.
Good luck for 2017, but in the words of Duncan Bannatyne ‘Yep – I’m ooouttt’
WOW. With all that expertise and knowledge I am surprised you don’t run your own fund (he says with tongue in cheek).
Speaking for myself, I think it is regrettable that anyone who posts a less than wholeheartedly enthusiastic message in one these conservations should immediately be condemned (sarcastically or otherwise) by other posters. Personally, I think it is important to think critically about my investment choices, and the points which Raj was making are points worth thinking about – even if, at the end of the day, you might end up disagreeing with his conclusions.
I am all for intelligent debate and questions asked in a respectful manner but I find Raj’s comments patronizing and disrespectful towards Neil and his team. It seems he has already made his mind-up and his comments are not aimed at resolving issues and are more aimed to discredit what Neil and his team are doing. Personally his comments suggest to me he is a ‘loose cannon’ and doesn’t have the prudence or the patience to last long as an investor. I therefore like to make comments as such to attempt to expose their poor contribution because other investors could end-up making wrong and unfair assumptions about a good product and an experienced investor.
Totally agree Richardd
EXCELLENT AS ALWAYS NEIL AND READY TO INVEST 2017 ISA INTO BOTH YOUR FUNDS I TRUST YOU AND YOUR TEAM WITH MY INVESTMENTS
HAPPY NEW YEAR TO YOU ALL FROM A VERY VERY HAPPY INVESTER IN YOUR FUNDS
THANKYOU
Thank you for the review.
One thing that would be useful to clarify is why you have the patience to sit with Capita when you didn’t show the same for Rolls-Royce. Both seem well positioned for the long-term, both have great order books, both came out with (series of) profit warnings and both – one would expect- would work their way out of short-term issues in several years time.
Kind regards and all the best to Neil, Mitchell and team for 2017,
Richard
Hi Richard,
What we are doing, at all times, is trying to make a judgement about the true long-term value of a business and comparing that to where its share price is. That drives our thinking. Differences in the specific circumstances will influence the judgement that we arrive at and, of course, all situations are unique.
The investment decisions for Capita and Rolls-Royce were different for many reasons but most prominently, they related to our ability to retain conviction in the investment case. As we said at the time regarding Rolls-Royce, “Our decision to sell the shares reflects a significantly increased level of uncertainty about how these metrics will play out over the next 3 to 5 years in a way which will benefit Rolls’ shareholders. In many ways we hope we are wrong, but we think it is in our investors’ best interests to exercise caution at this point in time.”
I hope this helps and thanks for your comment and support.
I think the banking sector (especially Lloyds) will have a very good year. Has your position changed towards lloyds?
Hi Jerry,
Not enough for it to make its way into the portfolio. Much of what we wrote in this article last year still applies, but the banks are now, of course, several months further through the process of resolution.
https://woodfordfunds.com/words/blog/banks-still-far-from-normal/
Kind regards
Mitch
I remember that article, it was a really good read.
Of course the UK bank that is furthest down the route of post-crisis resolution is Northern Rock. Here sensible policies like wiping out shareholders and a ‘good bank / bad bank’ debt for equity swap were employed.
I’ve been quietly building up a holding in the ‘good bank’ – aka Virgin Money Group – at under book value and at over a projected 10% gross yield.
I can’t see for the life of me why ‘the city’ have placed such a stingy valuation on this bank when they are trading loss making Metrobank at 6 times book value and 20 times revenue. Perhaps it’s because they all walk past Metrobank on the way to work?
2016 a disappointing year, so holding back on further adding to Neil’s fund. We are not used to such disappointing returns. There is no loyalty where money is concerned, so improvements please.
If you don’t grasp the concept of what Neil is trying to do here I would suggest you consider elsewhere.
There are two unspoken assumptions in that rather unkind remark. The first is that it is possible from round-ups such as this one to understand the investment process which WIM undertakes on our behalf, and for which we pay by way of management fees. The second is that, if you do understand the investment process, you must necessarily agree with it. I wrote a lengthy post about the first of these assumptions in response to the November round-up for WPCT. The point I was trying to make was that these bulletins and round-ups have, to my mind, come to resemble PR spin more than a genuine and critical analysis of what has gone right and what has gone wrong in the investment of our money. The reason why Warren Buffett’s annual letters to his shareholders are so interesting is that he focusses unremittingly on the things that he thinks he did wrong. He acknowledges that he makes mistakes. We all do. He identifies them. He analyses them, at length. And crucially, he tries to work out how he can avoid making a similar mistake again. I have yet to see WIM attempt anything similar in these posts. If an investment goes down in value, one of two explanations is always given. It is either a ‘bump in the road’ caused by an unexpected failure of the investee’s technology. Or it is that the market is inexplicably undervaluing the investment. Having read these bulletins religiously since the outset, I do not honestly think I understand any more about WIM’s investment process and decision-making than I did at the start. I will remain invested here. But, as an investment decision, this has become a leap of faith more than a rational and informed conclusion.
Mark,
There is more information and insight into this fund than probably any other fund in fund management history! Let me say that again: There is more information and insight into this fund than probably any other fund in fund management history!
I am sorry that you cannot grasp what Neil and team are doing here but that most likely is a reflection on you rather than the other way around. I don’t see what you expect WIM to do over and above what they have already done, but I am confident, without wanting to speak too much out of turn, that WIM would be more than happy to consider your requests if they are fair and reasonable.
Richard
You are quite wrong that there is more information and insight into this fund than probably any other in fund management history. Let me say that again: you are quite wrong that there is more information and insight into this fund than probably any other fund in fund management history!
Some years ago, a man called Warren Buffett took over the management of what was then a failing New England textile-producing company. It is called Berkshire Hathaway. You may have heard of it. He turned it into an investment fund. It has become quite famous, in its way. Each year Mr Buffett wrote a letter to his investors, in which he provided them with information and insight into how their investment in the company had faired that year. All of these letters are available online, at http://www.berkshirehathaway.com/letters/letters.html. If you would like to see what real information and insight into the workings of an investment fund looks like, then I commend them to you. They are well worth reading. Berkshire Hathaway started that level of investor engagement in 1977, and has continued with it ever since.
I should be grateful, also, if you could try to stop disparaging me, by assuming and asserting that I am unable to “grasp” what WIM are doing, and that this is “a reflection” on me, “rather than the other way around”. It is unnecessary. And it is offensive. What I have been saying is that these posts do not genuinely try to provide the level of investor engagement that they look as though they provide. I do not say that because I am stupid. It is not because I am unable to “grasp” anything. It is because I have seen what real investor engagement looks like, and this is not it. Take NWBO as an example. WIM invested in it. It has been a poor investment. When this is raised by an investor in the fund or in WPCT, the answer that comes back from WIM is that WIM invested in NWBO because it believed in the technology. But there has been no failure of the technology. So to say that WIM invested because it believed in the technology is a failure to engage with the question of what went wrong in the decision-making process that led to the investment. Warren Buffett would, by now, have written pages of agonised analysis of how the decision to invest came to be made, and how he came to get it so wrong. That is an example of real “information and insight”, which is not remotely the same as simply repeating, over and over again, that WIM invests in businesses because of their attractive fundamentals, and that where they have performed badly this is because the market is undervaluing them. Assuming the investments are well chosen, then that is a statement of the entirely obvious. It is not “information”. It is certainly not “insight”. I personally think it is “fair and reasonable”, as an investor in this fund, to hope that I might be given “information” and “insight”, and not merely the fluff with which some others appear to be content.
I still believe my statement about this fund to be correct. First, I did add the caveat ‘probably’ because some would argue the case for other investors like Buffet and this would lead to a rather debatable point.
With respect to Buffet though, it is like comparing apples with oranges. For a start Berkshire Hathaway has a completely different capital structure than Woodford Equity Income – it is a holding company. The structure of Berkshire allows Buffett greater breathing space to invest long-term. As far as I can remember I believe the holding company has only ever paid one dividend! Only until relatively recently its liquidity was so poor that it was not included in widely known and accepted stock market indices. To own a full A share will set you back approximately $250,000! All this leads to a difference in capital flow, investor demographic, investor expectation, competition, governance and so on.
Those reports by Buffett are written once a year. I believe that Berkshire has undisclosed positions in some companies. Woodford reports once a month with full disclosure of portfolio.
And the end of the day it comes down to whether the ‘fund’ is disclosing enough information for you to have confidence in being an investor.
If you think about it, if Neil decides to explain and provide rationale for _everything_ that he does – which by nature – will imply to some extent what he plans to do then he is effectively giving away Woodford IPR and lessening his competitive advantage. As investors in the fund we do not want that. So there is a balance and I think Neil and team have achieved this as best they can.
Personally I believe Buffett is overrated because his ongoing success is now really the result of unequalled economies of scale more than anything else.
Warren Buffett is over-rated?
In his letters to shareholders, he sets out the running compound annual growth rate from 1965 to date. In the 2015 letter, the CAGR was 19.2%. An investment of £10,000, at that CAGR over that period, would have become £77.6 million. Personally, I don’t think it is remotely possible to over-rate that achievement.
No denying those facts. Excellent and one of the world’s best. But I am viewing the options as a long-term investor today and not as it was in 20th century US which is where Buffet had the fortune to be at that time.
Saying Buffett is over rated is like saying climate change is a hoax perpetrated by the Chinese to weaken American manufacturing.
Mark
Warren Buffet is a rare breed in the investment community . I think Neil and his team are a good second together with Skagen Kon Tiki fund.
That’s just it, we are now unsure of what is ‘trying’ to be done.
Richard, PLEASE stop criticising people who post a less than glowing endorsement of the 2016 performance. You risk losing credibility and appearing as a “fan boy”.
I admire Neil’s track record and respect his investment strategy. However, I also have concerns about the recent performance.
Simon,
If you have concerns with recent performance, fine. We would all like stellar performances every year. But as Neil points out in the video – and he is absolutely right – if you invest for long-term that means it is likely some years will not deliver what you would like them to. That is life. The only choice you have is to alter your investment thesis and start to go and chase fad and fashionable momentum driven stocks – not something any sensible investor would advocate.
I only made two initial comments in reply to other comments made which in my opinion were rude and disrespectful – that is what triggered my response. I have no problems with people raising concerns so long as they are in the right manner – that is healthy. If I see rudeness on any thread – you will likely get me to respond, my mother wouldn’t have it any other way! Good luck with your investing.
Richard
It seems that Trump, from what he said yesterday, will be as anti-pharma as Hilary might have been.
Many thanks for the update. I find these commentaries valuable and illuminating. And I fully agree that valuation coupled with a long term perspective is the way to higher returns.
A few months ago, I asked this question and did not receive any comment. Let me ask it again, as I feel it’s still relevant: Given the huge drop (50%+ in 2016) in share price of Capita, why aren’t we seeing insider buying and share buybacks? If management believe (a) the business model is not broken; (b) there will not be a dilutive share issuance; and (c) the stock is significantly undervalued (Neil says “the share price now profoundly undervalues the fundamental long-term attractions of this business.”), then arguably share buybacks would be value accretive for shareholders. And, furthermore, it’s puzzling to me that senior insiders have not been buying aggressively.
And, as a side-effect, these actions might help reassure the markets. After all, if insiders are not buying at a dramatically knocked-down price – implying they do not see the prospective value – why should the public?
Thanks for any response.
Between September and December directors bought nearly £250,000 of shares with the CEO investing nearly £200,000 on his own money.
Thanks for that. Yes, the CEO did make two significant buys. But other directors, including the Finance Director, in December bought only about 2,000 shares at ~415p. These are paltry buys at multi-year lows which don’t inspire confidence (in me at least).
Hi VGM,
We tend not to pay too much attention to director trading activity. It would perhaps have been helpful if senior executives had been more active in buying shares in recent months, but we were able to get the conviction we needed to maintain the position (and indeed add to the position) without it. The perception that Capita’s balance sheet has become stretched probably explains why the company has not embarked on a share buyback – although we believe that this perception exaggerates reality, we do think that management’s attempts to address balance sheet concerns are appropriate.
Kind regards
Mitch
When they are actively selling profit making assets, you know that their balance sheet is stretched, not just a perception.
Neil held the view previously that deflation was very much on the cards, is this still the case?
Hi Brad – yes it is still the case. Clearly, we are going to see some inflation over the next twelve months but we don’t think it will stick around for long. The deflationary pressures that have been exerting themselves in recent years – ageing demographics, weak productivity and excessive debt – are still very much with us.
Kind regards
Mitch
Trade was 56.5% of UK GDP in 2015. An exogenous shock has caused sterling to drop 20% since Brexit. Most goods UK imports are non-discretionary. Unless there is a massive fall in nominal wages, then inflation is guaranteed.
Excellent insight as always, many thanks to all the team for your continued committment, insight & transparency. Happy, healthy & prosperous new year to all investors & all at Woodford.
I am looking at the triple therapy for copd which is a combination of already used drugs.That does not seem innovative and with costs being important I do not see this being a money earner.
It is difficult to get any really new medicines out and I appreciate that but the problem these days is there are few real advances to invest in.
I still strongly support the longer term value approach of both the Woodford fund & trust and the company ethos wrt bonuses etc, and hope that they continue to steer clear of commodities, oilers & banks; ‘investing’ in response to market noise just lines the pockets of intermediaries. In my view, Woodford do a good job of search & stewardship, and shock horror, this nurturing approach to early stage businesses might actually benefit the UK economy as well as investors. Personally I would rather see value added by organic growth than too much talk of M&A, but anyway, stick with the plan.
I for one still have 100% faith in Neil and the team and believe 2017 will be the year the funds positioning is proven to be the right one.
The only one point I don’t seem to get over is the investment in Allied Minds. Is it really a £B+ company? Personally I would have invested that money elsewhere until ALM looked like offering good tangible value.
Hi Sean,
Thank you for your support.
Allied Minds, in our view, is a very interesting and fundamentally attractive investment opportunity with considerable long-term potential. Indeed, we participated in the recent share placing, which puts the company in an even stronger position to create value for its shareholders by capitalising on investment opportunities and further developing its portfolio of exciting and innovative young businesses.
Kind regards,
Mitch
Sorry to see u go raj but since launch I’m up 27% on a heavy investment so going no where
Good luck Alan, hope it works out for all of us. What I’d call boring global trusts have done a lot better over the same time frame, e.g. FRCL 45% excluding divi. I’m less sure about how UK earnings will be affected over the next few years with Brexit. E.g. Working for a outsourcer myself I am aware earnings will be impacted with uncertainty as companies hold back spending and Brexit brings that in spades. Which other sectors will be impacted? I’m sure many, to which I wont want to hear that the woodford team were ‘surprised’ with a drop in earnings, I already know its coming and I think I should act to preserve capital.
CF Woodford 0.75% OCF, return circa 3%, FTSE All-share 0.8% OCF, return 16%. Do the math.
I don’t think anyone invests in this fund because they want to be weighted toward natural resources and banks. From Jan 2013 – Jan 2016 the FTSE all share returned a big fat zero.
As always, the insight is very much appreciated. I would agree with Neil’s view that ultimately, it is fundamentals that matter. However, this Telegraph article offers an interesting insight into market valuation taking into consideration the effects of Brexit and temporarily weak earnings from companies exposed to commodity prices in 2016. I also thought that the comment in the “comments” section at the bottom from John Jones is a valid one.
http://www.telegraph.co.uk/investing/shares/ftse-100s-pe-ratio-33-historical-average-15-shares-hugely-overvalued/
I read the various comments with interest. I agree it is very disappointing to read about the poor performance of the fund having encouraged my wife to invest some of her ISA. Looking back at my investments over the years, I recall reading about stop losses as one tool to limit downside but I also understand that it is challenging to see a stock perform badly against all the reasons one believes should generate good returns and still justify holding on. Maybe because the fund has become so big it is difficult to take stop losses, or the opposite and allow winners to continue. Hope 2017 shows better performance, we trust you and believe active performance has a place in portfolios along side index funds. We will stick with the fund for now, but you are on notice as we can not afford poor performance for long. Keep up the hard work.
No real professional investor uses stop losses.
Have successfully invested in Neil’s Invesco Perpetual Fund in the ‘noughties’ , I confidently waded in to WPCT shortly after launch with around 10 % of my portfolio. I am therefore very disappointed that whilst most of my own stock and fund selections have gained between 5 and 65% ( agree that Neil also chose Burford Capital ) ; my investment in WPCT is currently down 21%, even in a period when the FTSE is hitting record levels.
Logically I should get out, but upon listening to Neil’s recent interviews, and reading his team’s confident articles, I am inclined to give him until end of March ’17 to see if he can get his losses below 20%. If he cannot, then ” I’m out “, and get on with my own selections.
( PS I’m probably
No doubt Mr. Woodford is a legend, and those who leave purely on the back of a bad year are unlikely to make good returns.
What is a real concern is the sheer number of stocks which experienced significant losses. A great investor once said what distinguishes the top investors is not the number of winners they pick but number of losers. I wonder if Mr. Woodford has the right team to manage such a large fund which focuses mainly on health care.
Btw it is unfair to strip out FTSE’s best performers. This was not done in 2015 when the resource companies had massive declines. They are cyclicals and they tend to turn at the point of greatest pessimism, so quite naturally fundamentals chase the share price rather than the other way around.