Neil Woodford’s Latest Buys And Sells: Mega-Million-Pound Calls On AstraZeneca plc, Imperial Tobacco Group PLC And G4S plc

G A Chester examines Woodford’s big decisions on AstraZeneca plc (LON:AZN), Imperial Tobacco Group PLC (LON:IMT) and G4S plc (LON:GFS).

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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.

It’s always useful to see which shares the experts are buying and selling — and Neil Woodford is as expert as they come.

Through his Invesco Perpetual Income and High Income funds, Woodford looks after more than £20 billion of client money. His High Income fund has generated a superb 220% return over the last 10 years, compared with a 123% return for the average UK equity income fund.

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The latest half-year report for Woodford’s High Income fund has just been published, and the document reveals which stocks he’s been pumping cash into and which stocks he’s been selling.

Cheap tobacco

Woodford slightly trimmed back his holding of British American Tobacco, but whacked up his stake in Imperial Tobacco (LSE: IMT) (NASDAQOTH: ITYBY.US). The master investor purchased a net 2.55 million of the latter’s shares for around £60m at what I calculate to be an average buy price of 2,339p.

This is Woodford the contrarian value investor at work, as the earnings and dividend valuations within the table below show.

Company Current share price Forward P/E Forward dividend yield
Imperial Tobacco 2,132p 9.7 5.8%
British American Tobacco 3,255p 14.7 4.4%

Cheap pharma

Woodford added over a million shares to the High Income fund’s stake in AstraZeneca (LSE: AZN) (NYSE: AZN.US) at a net cost of getting on for £33m. My sums say he paid an average of 3,026p a share. As with the tobacco companies, Woodford upped his stake in the lowlier rated of the two FTSE 100 big pharma firms.

Company Current share price Forward P/E Forward dividend yield
AstraZeneca 3,178p 9.6 5.6%
GlaxoSmithKline 1,645p 14.2 4.4%

A FTSE 100 financial

Woodford, who famously sold out of big financials before they were hammered by the global banking crisis, has invested in a FTSE 100 financial company for the first time since. What a turn up for the books that is! The company in question is insurer Legal & General. Woodford made a relatively small purchase of 2 million shares. Unfortunately, I can’t tell you how much he paid, but the average price during the period was 166p and the shares are trading at 187p today.

Will Woodford further build his stake in L&G (my guess is yes)? And is he now ready to invest in more FTSE 100 financials (I’m not so sure about that one)? We’ll have to wait and see.

A £48m sell and three £16m top-ups

Woodford reduced his holding in household goods group Reckitt Benckiser from 15 million shares to a bit less than 14 million. The sale raised in excess of £48m, and my sums tell me the average sale price was 4,283p a share. The shares are currently trading at 4,428p.

The proceeds from Reckitt Benckiser are matched by three £16m top-ups. Woodford added to his existing holdings in: BT (average buy price 318p; current price 336p), Centrica (345p; now 386p) and G4S (LSE: GFS) (290p; now 258p). The last-named company, then, is the one you can buy cheaper today than the average price Woodford paid. G4S is trading at a forecast P/E of 14 for the year ending December 2013, falling to 12.4 for 2014.

Woodford winners exclusive

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 over a quarter of a century.

If you’re interested in reading an exclusive, newly-updated analysis of eight of Woodford’s favoured blue chips, help yourself to this free Motley Fool report.

The report is full of valuable investing insights and is free to download right now: simply click here.

> G A Chester does not own any shares mentioned in this article.

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