Woodford makes big call on tobacco stocks

Added 17th July 2017

Neil Woodford dropped British American Tobacco from his flagship equity fund in June, a stock which had enjoyed a consistent place in his strategies throughout his career.

Woodford makes big call on tobacco stocks

The drastic move was attributed to the fact the “valuation opportunity” in tobacco had played out, and despite a remaining small holding in the “undervalued” Imperial Brands, Woodford lost conviction in the sector overall.

Woodford has maintained an optimistic view of the UK economy after first revealing major portfolio shifts into cyclical growth stocks in May.

He hinted at his lower conviction back in May when he first began reducing his position in British American Tobacco.

Mitchell Fraser-Jones explained the sell off in an online post: “We completely sold the fund’s position in British American Tobacco which has been present in the portfolio since its inception and has been a part of Neil’s mandates practically throughout his career.

“Neil owned stakes in tobacco companies before the dotcom bubble of the late 90s, but it was that episode of market history that marked a significant increase in tobacco exposure which has prevailed until recently.”

In March 2000, British American Tobacco shares sold for just £2.25 a piece, the Woodford fund sold there’s at a price of £50 ($66, €57) each, Fraser-Jones added.

Inclusions

With the proceeds from the sale, Woodford instead opted for small holdings in unsecured, short-term loan supplier Morses Club and a digital start-up Drayson Technologies.

He also added to his holding in retailer Next despite weaknesses in consumer consumption as well as the fund’s biggest detractor for the month, Provident Financial.

Woodford also strengthened his leaning towards domestically-focused stocks on the back of his positive assumptions about the UK, adding to holdings in Barratt Developments, British Land, Taylor Wimpey and Lloyds.

“The portfolio reflects our caution on the global economic outlook and our growing confidence in the prospects of the UK economy.

“The result is a mix of high quality, attractively-valued dependable growth companies, a selection of compellingly undervalued domestic cyclical stocks and a collection of earlier-stage businesses which have incredible long-term growth potential,” Fraser-Jones concluded.

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Louise Hill

Senior Reporter

Louise joined Portfolio Adviser in December 2016 as one of the editorial team’s news reporters based in London. Originally from Liverpool, she is an NCTJ-qualified journalist and began her career in 2014 working on local newspapers.

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