Why I believe Neil Woodford could still make you amazingly rich

2018 could be another tough year for dividend hero Neil Woodford but Harvey Jones still reckons he should come good in the end.

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.

Two years ago, Neil Woodford ruled supreme. His eponymous fund CF Woodford Equity Income had thrashed all comers in the year since launch in June 2014, returning a thumping 16.2% against just 5.3% across the UK Equity Income sector. Investor money duly flooded in.

In Neil we trust

When he launched Woodford Patient Capital Trust the following April it instantly attracted £500m, even though this was an entirely new venture for him, an investment trust focusing on early-stage companies. Then it started to go wrong.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

CF Woodford Equity Income’s second discrete performance year undermined the myth of invincibility, growing just 3.8% against 9.8% on its benchmark, according to Trustnet.com. In year three it fell 0.1%, while its benchmark grew a whopping 11.1%. No Superman, he.


If you thought that was ugly, cover your eyes. Woodford Patient Capital Trust fell 9.9% then 6.5% over its first two years, against growth of 3.7% and 18% on its benchmark, the All Companies index. He has also suffered embarrassing stock disasters: Provident Financial, AstraZenecaAllied MindsAA and in his investment trust, Sphere Medical Holdings. The cry went up: what’s going wrong with Woodford?

I have been scouring performance charts for signs of a recent comeback but over the last three months, CF Woodford Equity Income is down 2.4%, against a 3.2% rise on its benchmark.

He is responding as he always has when the cycle turns against him: by hunkering down, ignoring the hype, and trusting his judgement. He did it when he shunned the dotcom boom in the late 1990s and banking stocks before the financial crisis. Performance slipped, analysts became sniffy, investors baulked and history proved him right.

Red peril

Today he says the economy is in a bubble again, and he is positioned to benefit when it “inevitably bursts”. He can see so many “lights flashing red” he is losing count, including Bitcoin’s surge, European junk bonds yielding less than US Treasuries, historically low volatility and triple-leveraged ETFs attracting gigantic inflows.

Woodford notes that during every bubble a subset of stocks is dumped as investors rush to catch the latest fashion. He is hoovering up these uncool stocks, of which AstraZeneca is a good example, and biding his time, saying this is “an opportunity to capture assets at incredibly depressed valuations, the likes of which I have only seen two or three times during my 30-year career.”

Trouble with bubbles

Woodford isn’t the only one worried about heady valuations. The US has only been this expensive three times before, in 1929, 1999 and 2007. Nor is he the only one to note that after recent underperformance the UK looks relatively cheap.

The problem with calling a correction is that you are trying to time the market, which is impossible. Bubbles typically blow for longer than people expect and with the IMF predicting strong economic growth next year, this one could carry on inflating. So 2018 could be another year of pain for Woodford. The cycle will one day swing his way, because cycles do. Neil Woodford could still make you amazingly rich, if you are patient.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Harvey Jones owns units in CF Woodford Equity Income. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Electric cars charging at a charging station
Investing Articles

A cheap UK share I’d buy for the electric vehicle revolution

This cheap UK share has collapsed in value since I bought last year. But here's why I'm thinking of buying…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

3 distressed stocks with huge potential that I’m considering for my portfolio!

These three distressed stocks have performed badly in 2022, but that doesn't mean they won't recover. Here's why I'm considering…

Read more »

Luxury inside of NIO car
Investing Articles

Here’s why I’ve just bought NIO shares!

I've recently bought NIO shares, despite the stock being down nearly 80% over the past year. Here's why!

Read more »

Mature people enjoying time together during road trip
Investing Articles

Is now the time to buy Tesla shares?

Tesla's share price has fallen in 2022 and so has its valuation. Edward Sheldon looks at whether this is a…

Read more »

A graph made of neon tubes in a room
Investing Articles

Are Woodbois shares worth me buying at 4.7p?

Jon Smith considers the recent surge in price for Woodbois shares, and wonders if the move lower last week represents…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How I’d generate a passive income for life with just £20 a week

Dividend shares can be an excellent way to earn a passive income for life. Our writer discusses a plan to…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Hargreaves Lansdown investors are buying these cheap FTSE 100 shares. Should I?

Paul Summers takes a closer look at two cheap FTSE 100 stocks that were proving very popular with investors last…

Read more »

A retired couple review their investing portfolio
Investing Articles

Investing in dividend stocks: 5 shares with BIG yields to buy!

I think investing in stocks is a great idea following recent market volatility. I can pick up some of the…

Read more »