It’s rare that ace fund manager Neil Woodford buys or sells a stock without it being widely reported in the financial pages. And when it’s a major FTSE 100 stock, it’s just about guaranteed to make the headlines.
However, Woodford has quietly dumped his holding in a major blue chip and it seems to have passed the world by.
Now you see it, now you don’t
In the CF Woodford Equity Income Fund monthly update for November (published 16 December) we learnt that Woodford had reduced the portfolio’s holding in non-life insurance company, Hiscox, and “recycled part of the position into other opportunities where valuations are a bit more appealing”.
The commentary continued:
“These included the commencement of a new position in life insurance business, Aviva (LSE: AV). In some respects, the investment case for Aviva is similar to that for Legal & General as both companies have good management teams and very attractive valuations, particularly in terms of yield. Aviva, although broadly similar to Legal & General, has a portfolio of different growth drivers in savings and protection markets and we deemed it attractive enough to start building a modest position”.
Woodford’s new holding in Aviva was widely reported. And the valuation certainly did look appealing at around 10 times forecast earnings, with a dividend yield of well over 5%.
In terms of its weighting in the portfolio at 30 November, the company was just 0.1%, compared, for example, with Legal & General at 5.4%.
However, far from the initial purchase of Aviva being the start of building a new position, Woodford did a dramatic U-turn, because in the fund’s next full portfolio listing at 31 December, it had disappeared altogether.
Mystery solved
Presumably, the holding was dumped in the second half of December, as it would be strange for the update of the 16th to speak of building a position, if the position had already been exited. There was no trading news from the company between the buy and sell, so what was behind Woodford’s decision?
Neither the fund’s monthly commentary for December, nor that for January mentioned the disposal. However, Woodford spokesman Paul Farrow this morning confirmed the sale and pointed me to a reply to a reader query tucked away in the comments section below the fund update:
Simon Purchas 18 Jan 2017 at 6:51 pm: “Where has Aviva gone? That was quick!”
Mitchell Fraser-Jones 19 Jan 2017 at 1:21 pm : “… Good spot! We sold the very small position in Aviva as its shares have performed robustly in the short period since it was introduced to the portfolio. We have decided to wait for a more attractive valuation before building a more meaningful position”.
So, there you have it. The rise in Aviva’s shares between November and December moved Woodford’s position on the stock from ‘buy’ to ‘sell’ on the grounds of valuation.
