The Motley Fool

Is it time to pile into the Woodford Patient Capital Trust?

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.

Image source: Getty Images.

When he set out to create his Patient Capital Trust (LSE: WPCT), Neil Woodford was at pains to explain the long-term nature of the company. With a focus on hi-tech start-ups, the investment trust’s performance should be judged over a three-to-five-year period, he explained.

Unfortunately, investors don’t seem to be willing to hang around for these returns to materialise. After initially proving to be a hit, as evidenced by the trust’s 15% premium to net asset value three months after its IPO in April 2015, investors have slowly drifted away. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Today, the trust trades at a 13% discount to the latest reported net asset value of 102p. Earlier this year, the discount blew out to nearly 30%.

High risk, high reward 

I have never been entirely won over by Woodford’s patient capital strategy because I know how difficult it can be to pick early-stage tech and biotech companies successfully. 

Based on various surveys and studies, we know approximately two thirds of venture capital funds fail to produced positive returns for investors and a similar percentage of venture capital-backed companies fail. Most of these early-stage investors pin their hopes on just one investment paying off, which usually produces such fantastic profits all the other losses are forgotten.

Now I’m not saying Woodford is following the same approach. He already has an impressive record of investing in private companies, established when he was managing his previous stable of funds at Invesco, but it’s difficult to ignore the data from the rest of the industry. 

The Patient Capital Trust has focused its investments on the most promising companies, like Ultrahaptics, which has developed a technology that uses “high-frequency ultrasound to enable the sensation of touch to be felt in mid-air.” This company accounts for 2.8% of the trust’s portfolio, and recently completed another £35m fundraising. The technology is being used in Las Vegas in gaming machines and has also attracted other commercial partners such as Nike, Dell and IBM.

This isn’t the only company in the portfolio that’s pushing ahead. A few weeks ago, the trust told investors that three of its biotech startups, Immunocore, Mission Therapeutics and Spin Memory, have all signed landmark collaboration agreements with leading pharmaceutical companies and technology groups to help push forward product development.

Making progress 

There has been a steady stream of positive news from the portfolio throughout 2018. And while they have also been some negative developments as well, broadly speaking, the investee companies are moving forward. 

And for risk tolerance investors, now could be the time to consider taking a position here. A recent research note from City analysts pointed out that the number of the investee companies are now maturing and have reached “demonstrable milestones.” 

So, while there is still plenty of risk that the portfolio could not perform as expected, recent developments have helped de-risk the trust’s investment portfolio. This doesn’t guarantee returns, but I reckon recent events have dramatically improved the quality of the investment vehicle. A mid-teens discount to net asset value only sweetens the deal, in my view. 

If you’re happy with the risk that comes with investing in early-stage companies, the Woodford Patient Capital Trust might be worth further research.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended RPC Group. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.