What Neil Woodford Has Been Buying

LONDON -- It's always useful to see which shares the experts are buying, especially in times as uncertain as these.

Neil Woodford is as expert as they come. Through his Invesco Perpetual Income and High Income Funds, he looks after an enormous 20 billion pounds of client money. His High Income fund has generated a superb 347% return during the last 15 years -- more than eight times the return of the wider market.

So, what has Mr. Woodford been buying during this year's bout of eurozone worries? Well, the latest half-year report for his 11 billion pound High Income Fund has just been published, and the document reveals the companies into which he's been channeling large amounts of cash.

Here's what caught my eye.

Healthcare
Mr. Woodford established a new position in medical-devices group Smith & Nephew (LSE: SN.L  ) in the second half of 2011, and has pumped even more money into the shares this year -- 130 million pounds no less, which is his biggest single investment of the period.

My calculations say that Mr. Woodford paid an average price of 622 pence a share. The shares currently trade at 666 pence, so he's already made a devilishly good return on an investment that now represents 1.8% of his fund.

Smith & Nephew isn't a high yielder -- currently sub-2% -- but it is a fast dividend grower, and has also recently announced a new dividend policy, which involves a step-change increase in the level of the dividend payout. Happy days for our equity income maestro!

Pharmas
Health care continues to be Mr. Woodford's biggest sector bet -- it represents more than a third of the portfolio -- and big pharmaceutical groups are among his most prominent holdings.

Mr. Woodford has been a net buyer of GlaxoSmithKline (LSE: GSK.L  ) during the period and, more heavily, a buyer of the generally unloved 6%-yielding AstraZeneca (LSE: AZN.L  ) . He's increased his number of Astra shares by 8%, investing 73 million pounds at what I calculate to be an average buy price of 2,863 pence a share. Astra and Glaxo remain the top two holdings in the fund, both at more than 8%.

Elsewhere in the sector, Mr. Woodford has more than doubled the size of his holding in French pharma giant Sanofi, investing 108 million pounds, which increases the weighting of the specialist in diabetes and oncology products to 1.6% of the fund. At the same time, he's sold an almost matching value of shares in Swiss drugs colossus Roche, though Roche remains a significant holding at 3.9% of the fund.

Outsourcing
Outsourcing has been another sector favored recently by Mr. Woodford, with Capita (LSE: CPI.L  ) and Serco (LSE: SRP.L  ) both seeing sustained investment over the past 18 months.

Mr. Woodford established a small position in Serco in the first half of 2011, added to it in the second half, and has continued buying this year. His latest purchases amount to 29 million pounds, and my sums say he paid an average price of 528 pence a share. The shares are now trading at 570 pence.

Fellow outsourcer Capita -- another of Mr. Woodford's buys last year -- has been bulked up with a further 55 million pound investment this year. I calculate that Mr. Woodford paid an average of 662 pence a share for this latest tranche. The shares are now trading at 727 pence.

Capita and Serco have displayed impressive annual double-digit earnings growth through the last five tough years, and both firms are set to double their dividends on their pre-credit-crunch levels in the year ahead. Like Smith & Nephew, these are fast dividend growers rather than high yielders. Both offer yields below the market average: Capita 3.3% and Serco 1.6%.

Security
Not all of Mr. Woodford's latest buys have seen early share price increases. He spent 35 million pounds on a new holding in security group G4S at an average price I reckon to be 277 pence. This was just before G4S's Olympics debacle that sent the shares heading south with a vengeance. Having hit a low of 237 pence in July, they've bounced back somewhat and are now trading at 253 pence.

Secret of success
Mr. Woodford may not get every share call right -- that's impossible, even for him -- but what he has is a philosophy and strategy that have enabled him to build an extraordinary long-term performance record.

If you're interested in learning more about Mr. Woodford's enormously successful approach -- and about other dividend-paying blue chips he currently favors -- grab yourself the exclusive Motley Fool report, "8 Shares Held By Britain's Super Investor." The report is full of valuable investing insights and is free to download right now, simply by clicking here.

Investing is by no means easy in today's uncertain economy. That's why we've published “Top Sectors Of 2012” – our guide to three favorable industries. This free report will be dispatched immediately to your inbox.

Further investment opportunities:

G. A. Chester does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares of Smith & Nephew. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2005672, ~/Articles/ArticleHandler.aspx, 9/2/2014 1:47:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement