Neil Woodford has quietly ditched Aviva plc

Here’s why Neil Woodford has dumped Aviva plc (LON:AV).

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

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.

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »