Neil Woodford continues to build and shape the CF Woodford Equity Income fund he launched last June after calling time on his 26-year career with Invesco Perpetual.
During December, the master investor put more money into existing holdings Centrica (LSE: CNA), Babcock International (LSE: BAB), Paypoint (LSE: PAY), Drax (LSE: DRX) and Benchmark (LSE: BMK), and took a new position in Midatech Pharma.
British Gas owner Centrica and engineering support services group Babcock are two of Woodford’s less visible FTSE 100 holdings.
Centrica’s shares are trading at multi-year lows, with investor sentiment hit by everything from unfavourable weather patterns during 2014 to political posturing and regulatory uncertainty surrounding the UK’s big energy firms. As a result, Centrica trades on a modest 12-month forecast P/E of 13, with a massive 6.4% dividend yield.
Babcock is also out-of-favour with the market. Its shares are at 52-week lows. Babcock doesn’t have much of a dividend yield and its P/E of 13.3 is a little higher than Centrica’s. But Woodford and his team consider both companies to be at “attractive valuation levels”.
The same goes for FTSE 250 firm Paypoint. This company, which is the UK’s leading consumer payments processor, through its retail networks, and internet and mobile channels, trades on a slightly growthier P/E of 14, but is a slightly growthier firm.
Fellow FTSE 250 constituent Drax is another holding that Woodford added to in December. The electricity generator’s shares took a bit of a dive on a surprise announcement from the Department of Energy & Climate Change that it would be consulting on biomass policy changes.
Woodford and his team acknowledge that the business is exposed to “considerable political risk currently”, but said: “Drax remains a strategically important asset in the UK electricity sector and we are confident in its ability to generate attractive returns for shareholders in the future”.
Woodford is best known for his big blue-chip holdings, but he has within the fund what might be called a sub-portfolio of dynamic smaller cap companies in the technology and medical sectors.
Woodford added to his holding in one of the larger of these companies: £270m animal healthcare technology firm Benchmark. He was happy to pay 85p a share when Benchmark did a placing to raise funds to acquire salmon breeding and genetics companies SalmoBreed and Stofnfiskur.
Finally, Woodford also participated in a 267p-a-share IPO of Midatech Pharma, a company which uses tiny particles of pure gold to treat cancer and other medical conditions. Woodford stumped enough cash to give him 20% of the £74m AIM-listed firm’s shares.
