Here's the lowdown on the City super-investor's latest buys.
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 of client money. His High Income fund has generated a superb 347% return during the last 15 years -- over 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 High Income Fund has just been published, and the document reveals the companies into which he's been channelling 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) in the second half of 2011, and has pumped even more money into the shares this year -- £130 million no less, which is his biggest single investment of the period.
My sums say Mr Woodford paid an average price of 622p a share. The shares currently trade at 666p, so he's already made a devilishly good return on an investment that now represent 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 pay-out. Happy days for our equity income maestro!
Pharmas
Healthcare continues to be Mr Woodford's biggest sector bet -- it represents over 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) during the period and, more heavily, a buyer of the generally unloved 6%-yielding AstraZeneca (LSE: AZN). He's increased his number of Astra shares by 8%, investing £73 million at what I calculate to be an average buy price of 2,863p a share. Astra and Glaxo remain the top two holdings in the fund, both at over 8%.
Elsewhere in the sector, Mr Woodford has more than doubled the size of his holding in French pharma giant Sanofi, investing £108 million, 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 favoured by Mr Woodford of late, with Capita (LSE: CPI) and Serco (LSE: SRP) 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 and my sums say he paid an average price of 528p a share. The shares are now trading at 570p.
Fellow outsourcer Capita, another buy for Mr Woodford last year, has been bulked up with a further £55 million investment this year. I calculate Mr Woodford paid an average of 662p a share for this latest tranche. The shares are now trading at 727p.
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 on a new holding in security group G4S (LSE: GFS) at an average price I reckon to be 277p. This was just before G4S's Olympics debacle that sent the shares heading south with a vengeance. Having hit a low of 237p in July, they've bounced back somewhat and are now trading at 253p.
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 favours – 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.
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> G A Chester does not own shares in any of the companies mentioned in this article.
