Is Britain's blue-chip supremo a frustrated small-cap manager?
Master investor Neil Woodford is renowned for his love of big, defensive blue chips. His funds ring with the names of FTSE 100 giants, such as GlaxoSmithKline (LSE: GSK), British American Tobacco (LSE: BATS) and Vodafone (LSE: VOD).
(Just to let you know, this free Motley Fool report -- "8 Shares Held By Britain's Super Investor" -- reveals further details about these holdings and Mr Woodford's other favourite investments.)
But is Mr Woodford, who manages over £20bn for investors in Invesco Perpetual's Income and High Income funds and Edinburgh Investment Trust (LSE: EDIN), a frustrated small-cap manager?
You might be surprised at just how many tiddlers take the fancy of Invesco's celebrated big-game fisherman.
I've told you about a few of these in the past, when they've been at a discount to the price Mr Woodford paid: biotech firms Proximagen (LSE: PRX) and Tissue Regenix (LSE: TRX), and litigation investor Juridica (LSE: JIL).
I've recently spotted another in this vein, which I'll tell you about later in the article, but I first want to show you the extent of Mr Woodford's interest in smaller companies.
Mr Woodford's AIM portfolio
Having something over £500m invested in AIM-listed stocks may not be much when you manage over £20bn in total, but it's chastening to think that Mr Woodford's sub-portfolio, on a standalone basis, would actually be one of the UK's biggest Smaller Companies funds!
The table below shows Mr Woodford's "AIM portfolio", based on the last full-portfolio disclosures of his funds.
|Company||Sector||High Income fund (£m)||Income fund (£m)||Edinburgh trust (£m)||Total (£m)|
|e-Therapeutics (LSE: ETX)||Biotechnology||5.4||6.7|| ||12.1|
|Tissue Regenix||Biotechnology||13.6|| || ||13.6|
|Vernalis (LSE: VER)||Biotechnology||2.7||4.0|| ||6.7|
|Breedon Aggregates (LSE: BREE)||Building Materials|| ||12.8|| ||12.8|
|Hightex (LSE: HTIG)||Building Materials||0.002|| || ||0.0|
|Ashley House (LSE: ASH)||Construction|| ||1.5|| ||1.5|
|Sterling Energy (LSE: SEY)||Oil & Gas||2.2||10.6|| ||12.8|
|Halosource (LSE: HALO)||Chemicals||6.2||6.6|| ||12.8|
|JJB Sports (LSE: JJB)||Clothing Retail||2.7||6.9|| ||9.6|
|Daisy (LSE: DAY)||Telecommunications||28.4||23.8|| ||52.2|
|Waterlogic (LSE: WTL)||Business Support Services||13.8|| || ||13.8|
|Cenkos Securities (LSE: CNKS)||Investment Services|| ||7.7|| ||7.7|
|Burford Capital (LSE: BUR)||Investment Company||38.5||28.1||4.8||71.4|
|Crystal Amber Fund (LSE: CRS)||Investment Company||8.3||6.1|| ||14.4|
|Eurovestech (LSE: EVT)||Investment Company||4.3||4.9||0.3||9.5|
|Imperial Innovations (LSE: IVO)||Investment Company||19.8||18.3|| ||38.1|
|Juridica||Investment Company||17.8||12.4|| ||30.2|
|Leaf Clean Energy (LSE: LEAF)||Investment Company||20.4||19.7|| ||40.1|
|LXB Retail Properties (LSE: LXB)||Investment Company||19.8||12.6|| ||32.4|
|Masawara (LSE: MASA)||Investment Company||12.1||12.6|| ||24.7|
|NBNK Investments (LSE: NBNK)||Investment Company||7.8||5.6|| ||13.4|
|Oakley Capital Investments (LSE: OCL)||Investment Company||30.2||22.4|| ||52.6|
|Speymill Macau Property (LSE: MCAU)||Investment Company||10.1||4.5|| ||14.6|
|Trading Emissions (LSE: TRE)||Investment Company||9.1||12.0|| ||21.1|
No fewer than 25 AIM holdings, all with the Woodford seal of approval! Quite a nice list for further research, I'd say. Only over-indebted sportswear firm JJB Sports really stands out for me as a blot on the landscape, being a former FTSE 250 company whose ignominious fall has seen it delist from the Main Market and join AIM.
Leaving aside the investment companies for the moment, Mr Woodford's largest holding, at over £50m, is Daisy Group. I know little about this provider of phone, broadband and mobile solutions to SMEs (small and medium-sized enterprises).
SMEs aren't having the easiest of times in the current economic climate, but Daisy looks set to make a maiden profit this year, so could be worthy of closer inspection.
Waterlogic, which manufactures point-of-use drinking water purification and dispensing systems, is another that caught my eye on a first sweep. The company was floated on AIM as recently as last year, and its maiden full-year results, announced last week, read well to me.
Waterlogic looks to have strong products in a growth market, as well as $50m in cash to further develop its systems and make complementary acquisitions.
A cabinet of curiosities
Around half of Mr Woodford's AIM holdings are investment companies of one sort or another. You'd be hard pressed to come up with a more curious and eclectic bunch.
The largest holding, at over £70m, is Burford Capital. Like the aforementioned Juridica, Burford is invested in a portfolio of arbitration and litigation cases in the US.
Among Woodford's other investment company picks, you'll find real-estate specialists (LXB Retail Properties and Speymill Macau Property) and, well, a whole gamut of interests, ranging from right-on renewable energy (Leaf Clean Energy) to projects in Robert Mugabe's Zimbabwe (Masawara).
Perhaps my favourite of these curiosities, at least in terms of its intrigue factor, is NBNK Investments. Founded by Lord Levene and a group of senior business figures, NBNK has ambitions "to build (primarily through acquisition) a new and substantial UK retail bank".
A share at a 13% discount
I recently stumbled across another buy-what-Woodford-bought-but-cheaper opportunity, and it comes from among the investment companies.
Imperial Innovations, which was floated on AIM in 2006, is a spin-out from Imperial College London. It builds and invests in technology and healthcare companies, commercialising Imperial's research.
In 2010, the group raised additional funds of £140m at 350p per share to expand its interests by backing commercialisation ventures coming out of University College London and Oxford and Cambridge Universities.
Mr Woodford responded to the cash call, and today Invesco holds 46% of Imperial Innovations' shares. The shares are currently trading at 306p -- a 13% discount to the fundraising price.
What do you think of Mr Woodford as a small-cap manager? If you think any of his AIM holdings would make a good (or bad) investment, feel free to share your thoughts in the comments box below.
Where is the UK's leading dividend stock-picker investing today? The identities of all of Neil Woodford's favourite blue chips are revealed in this free Motley Fool report -- "8 Shares Held By Britain's Super Investor".
Further investment opportunities:
> G A Chester does not own any of the shares mentioned in this article.