Purplebricks isn’t the only Neil Woodford share I’d sell today

Royston Wild explains why Purplebricks Group plc (LON: PURP) isn’t the sole Woodford-held share that he’d sell immediately.

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Neil Woodford favourite Purplebricks Group (LSE: PURP) was back in the headlines this week with fresh news on its global expansion programme.

Expanding its existing footprint in North America, the AIM-quoted business announced that it was about to launch in Florida and more specifically the Tampa and Orlando designated market areas. Purplebricks, which provides an online platform for property sellers to advertise their homes, already operates in DMAs spanning from Los Angeles to New York, San Diego, Las Vegas, Sacramento, Fresno and Phoenix.

Announcing details of the launch group chief executive Michael Bruce commented that “we are encouraged by our progress in the US and excited about the potential in Florida, and we continue to identify new markets in the US where our value proposition can greatly benefit both consumers and agents.”

The investment community is becoming more and more sceptical over Purplebricks’ ability to continue disrupting the traditional estate agency market in the UK and further afield, however, with sentiment worsening as its expansion programme is eating significantly into its bottom line.

The City is expecting the property play to finally move into profit in the year to April 2020, but as geographic expansion lifts costs and conditions in its UK marketplace worsen, I reckon this prediction is looking a little optimistic right now.

Profits poised to reverse?

I would be very tempted to sell Purplebricks today given the possibility of more scary details emerging when it releases its six-month trading update on November 6.

And another share in the Woodford Income Focus Fund that I’d be happy to cut adrift today is BCA Marketplace (LSE: BCA).

The car auctions specialist advised earlier this month that “the year has started strongly,” and City brokers are expecting earnings at the FTSE 250 company to continue rising too — a 5% advance is currently forecast for the 12 months to March 2019.

But I’m concerned that analyst estimates could be subject to swingeing downgrades in the months ahead as the Brexit saga hobbles economic growth and thus consumer and business confidence in the UK. And worryingly, the market does not seem to be factoring in the high probability of such forecast reductions, as reflected by BCA’s slightly-high forward P/E ratio of 16.2 times.

Latest car sales data from the Society of Motor Manufacturers and Traders (SMMT) outlined the precarious outlook for the used vehicle segment, August’s recent report showing that 2.09m units were sold during the April-June quarter, down 0.4% year-on-year.

This annual drop may not have been shocking but, as the deadline to Britain’s planned exit from the European Union draws ever closer, I for one am expecting the decline to become much more pronounced. The SMMT itself is also expecting the used car market to remain in trouble, the body advising last month that “with used sales so closely reflecting the new car market, some cooling is expected over the coming months.” In my opinion holding BCA shares is a high-risk business today.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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