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By Tom Winnifrith | Tuesday 6 November 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Over the past two years one salient feature of the Neil Woodford car crash is that every couple of months the Daily Mail or Mail on Sunday, which were the biggest cheer-leaders for Nomates when he set up Woodford Investment Management, runs an article saying “it’s bad but will get better, average down.” The trouble is that the Mail thesis is based on one big lie. At the weekend it was veteran Personal Finance hack Jeff Prestridge who landed an exclusive interview, i.e a blow job for Neil.
Presstrip admits that the past few years have been rocky for Woodford. Too right. His flagship fund’s performance sees it 286 out of 286 in terms of performance.
It is not as if the Woodford fund is Fulham (bottom of the Premier League) or even Macclesfield (Bottom of League Two). His fund is more like Bedworth United, currently bottom of the Evostik Southern Premier League with 4 points from 13 games and a goal difference of minus 21. But at least Bedford won a point at the weekend (a 1-1 draw away at Barwell) so can claim that the recovery is underway. Woodford would lose 6-0 at Barwell with at least half the damage coming from own goals. For him things just get worse and worse.
And so once again Woodford starts by playing the victim saying that he is not seeking sympathy but bleating that a lot of folks are being beastly to him – other fund managers, customers and even journalists. Heck, Neil earns £7 million a year and is doing a shite job, what does he expect? Praise?
At least Jeff Presstrip is not asking any tough questions about investing in unquoted companies that need to change the laws of physics to succeed, in daft and suspect valuations of unlisted stocks, emergency – now seemingly permanent – borrowings and a series of high profile PLC disasters which Nomates has backed. Nice Jeff. How do you fancy a press trip?
Then we get to the same Woodford defence which he has trotted out time and time again over the past two miserable years. The market is too high. Tech stocks are valued at insane levels. They will implode and then Woodford’s boring British low PE plays will come to the fore and he will be a frigging hero just like he was when he dodged the dotcom crash. But this is a lie.
Sure Neil has some such stocks in his unit trust although none at all in WPCT, the investment trust. But facing mounting redemptions plus numerous desperate bailout cash calls from so many of the loss making dogs he has backed he has had to sell down his exposure to these “safe” – it’s all relative – plays. And thus WPCT is up to its neck in unquoted loss making tech and biotech plays. Even the flasgship Unit Trust is now 16% invested in unquioted plays with a long tail of speculative, loss making quoted plays on top.
If the market does suffer a sell off all shares will fall by at least a small amount but the garbage in WPCT and clogging up at least 30% of the flagship Unit Trust will be hammered, struggling to refinance and crashing in value. To suggest that Woodford somehow offers a safe harbour ahead of a crash is just a lie.
The real issue for Woodford is that redemptions continue on a month on month basis. And that means he has to sell more of the liquid "quality" plays making his portfolios ever more exposed to the garbage. That is something Presstrip fails to alert his readers to in an article which is not journalism but plain and simple PR.
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