Why I’d dump Neil Woodford’s Patient Capital to buy this millionaire-maker investment trust

Woodford Patient Capital Trust plc (LON: WPCT) is struggling to keep up with the market. Here’s one investment trust that could be a better buy.

| 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.

Since its launch in 2015, the £653.3m shares in the Woodford Patient Capital Trust (LSE: WPCT) have lost 21%. 

For some comparison, over the same period the average fund in the IT UK All Companies sector has added 34%. That’s a performance gap of 55%!

Today, I’m going to look at the firm’s performance over the past three years and explain why the shares have lagged peers. I’ll also be looking at a trust that I believe could be a better buy. 

Long term investing 

When Neil Woodford launched Patient Capital, he did so as a protest against the rest of the investment industry, which he believes is too short-termist. Patient Capital was founded to invest with a long term outlook and not be constrained by the City’s performance obsession. 

Three years on from launch, Neil Woodford believes it’s still too early to judge the trust’s performance record. In a recent meeting with City analysts, he declared: “I could not be more confident that we will deliver on what we said three years ago when we launched Patient Capital. There has been quite a lot of commentary and the focus of that has been misjudged. We said we would deliver over a three to five-year period and we have only just got to the three-year point.

The problem is, Patient Capital’s short life has been dominated by high profile failures. Its most significant holding, shares in American biotech firm Prothena (at one point Woodford owned a third of the company), slumped 70% in April after it decided to discontinue the development of its lead drug. Shares in Allied Minds have also fallen following the writedown and disposal of its subsidiaries. These failures have eclipsed the smaller successes the trust has been able to achieve. 

As Patient Capital’s record shows, investing in early-stage companies is a tricky business. It’s virtually impossible to tell which businesses will succeed and which will fail.

This is why I’d avoid Woodford’s offering. Even though the star fund manager is confident in his stock picking abilities, I’d rather own an investment trust that holds already established businesses. EP Global Opportunities (LSE: EPG) is the perfect example. 

Global value 

The investment team at EP is on the lookout for undervalued investment opportunities around the world. The trust’s investment universe isn’t restricted. It can, and does, invest across the globe, giving investors exposure to economies they wouldn’t usually consider. 

Today, around 18% of net assets are invested in Japanese equities and 14% in the United States. Pharmaceutical giant Roche is the largest holding and healthcare is the most substantial sector exposure (18%). 

EP is globally diversified but what about its performance record? Well, since its inception (15 December 2003) EP’s net asset value per share has jumped 330% — including reinvestment of dividends. This performance track record, coupled with EP’s global equity exposure and exposure to the pharmaceutical sector, is enough to convince me that it’s a better buy than Patient Capital trust. 

My view is that, over the long term, EP will provide better, more consistent returns for investors without the additional risk of investing in start-up businesses.

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.

Rupert Hargreaves owns no share 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.

More on Investing Articles

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

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

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »