Neil Woodford Buys More Legal & General Group Plc, BAE Systems plc, Centrica PLC, SSE PLC & RM2 International SA

Catching my eye among Woodford’s latest trades are Legal & General Group Plc (LON:LGEN), BAE Systems plc (LON:BA), Centrica PLC (LON:CNA), SSE PLC (LON:SSE) and RM2 International SA (LON:RM2).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

What with the run-up to the General Election and the launch of his Patient Capital Trust — focused on fledgling growth companies — I didn’t expect Neil Woodford to be particularly busy tending to the more mature stocks of his established Woodford Equity Income Fund.

However, April proved to be a busier month than usual. A number of trades caught my eye among Woodford’s latest dealings: in particular, additions to his holdings in Legal & General (LSE: LGEN), BAE Systems (LSE: BA), Centrica (LSE: CNA), SSE (LSE: SSE) and RM2 International (LSE: RM2).

There’s only one blue-chip financial, one blue-chip financial…

Woodford continues to be less than keen on big FTSE 100 banks and insurers. In fact, he holds only one financial company from the blue-chip “premier league”, and that’s Legal & General.

Woodford’s team describes the life insurance industry as having been “opaque and unpredictable” historically, but sees, with L&G’s “relentless focus on cash generation”, a chief executive “transforming the business into a much simpler, easier to understand business with strong growth prospects”.

L&G trades on an undemanding forward P/E of 14, while the prospective dividend yield — to which Woodford remains attracted — is about 5%.

RM2, RM who?

AIM-listed RM2 International will not be as well-known to most investors as the likes of L&G. The pallet-maker “is still at an early-stage of its development but has tremendous potential to disrupt the pallet industry”, and Woodford is very keen on the company.

In adding to his holding, his fund update noted that RM2’s “recent contract win with PPG International [an S&P 500/Fortune 200 company] is very positive news, in our view, and could herald the broader adoption of its composite pallets”.

RM2 is loss-making at present, but revenues are forecast to leap from £18m this year to £65m next year, with the company starting to move towards profitability.

3 blue chips bulked up

Back to the FTSE 100, and Woodford added to a number of blue chips — that “demonstrated weakness in the run-up to the General Election” — at “what we consider to be attractive valuation levels”. These companies included BAE Systems, Centrica and SSE — described by Woodford’s team as “important income contributors”.

The shares of “Big Six” energy firms Centrica and SSE had been under the cloud of potential Labour Party meddling, but have rallied on the back of the Tory election victory. As such, investors today won’t get quite as high a yield as Woodford was able to secure, although the prospective income from the pair remains attractively above the market average: Centrica at 4.4% and SSE at 5.5%.

Conversely, BAE’s shares are currently a bit lower than when Woodford was buying, so investors today are getting a slightly better yield deal. The prospective income from BAE is 4.2%.

Other “important income contributors” that came in for top-ups during April were GlaxoSmithKline, Game Digital, Next and Royal Mail, while the fund “marginally trimmed” its position in BT, “where the share price is now back at levels not seen since early 2001”.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Centrica and GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »