Woodford Patient Capital Trust at record low! Worth a punt?

Buying shares in a collapsed empire could be the contrarian buy of your life. Is that a clever move here?

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.

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.

Shares in the Woodford Patient Capital Trust (LSE:WPCT) have plummeted to a record low on the news that Neil Woodford has been sacked from his billion-pound empire of funds.

Months of promises that plunge after plunge could be salvaged were all for naught when BlackRock finally cut Woodford loose from the flagship Equity Income Fund (EIF), with the additional news that all holdings would be liquidated.

In the year’s least surprising news, Woodford was then booted from Patient Capital Trust (PCT) too, albeit with the caveat he’ll serve out a three-month handover period.

But canny investors are often willing to buck the trend, being greedy when others are fearful and making a profit from others’ misfortune. You could pick up a giant pile of shares for a song. Is now the time to swoop in and make a killing?

What you’d get

Looking at the raw stats, the net asset value (NAV) of the PCT is trading at a massive discount. A 44% discount, to be exact. That’s stat number one. The NAV was last calculated on 11 October 2019. But compare that to the NAV at launch in April 2015: it was 100p. Now it’s around 66p.

In terms of the trades being made, investors are still buying the PCT in sizable amounts. £42,000 here, another £33,000 there.

But when the dust has settled, I’d wager the liquidation of the EIF could reveal a sizable gap between the real figures and its last posted NAV. If these figures really were inflated, then lawsuits will abound.

While Woodford did make a desperate last-ditch effort to claw back some cash by buying proven FTSE 100 dividend payers BT, Imperial Brands, and IAG, these make up less than 3% of the fund.

Looking at the other holdings, there’s an abundance of unlisted healthcare and biotech stocks. 10% of the fund is in BenvolentAI. Anyone heard of them? 8.3% is in Oxford Nanopore Tech. Another 8% is invested in Autolus Therapeutics.

I have absolutely no idea what these companies do, who their competitors are, or whether they are doing what they do any better than their rivals. It’s estimated that around 30% of all the companies that make up the fund are unquoted, making them difficult to value and trade. It means that if the fund manager wants to sell, there may not be enough buyers for the other side of the trade.

How to lose money fast

My general approach to making money in the stock market sits on one fundamental principle: to have at least an outline understanding of what I’m investing in.

For example, the highly-touted Futura Medical was once the darling of the new crop of pharma businesses. It has never made a profit, and investors taking a risky punt have seen the share price depressed as drug launches have not panned out.

In my opinion, putting money into the Woodford Patient Capital Trust now would be like buying a house that’s about to fall into the sea, on the off chance that the tide will turn around and start going the other way.

You might as well withdraw a bunch of tenners from the nearest ATM and chuck them on a bonfire. Be smart. Protect your wealth. It’s exponentially easier to save what you already have than to chase foolish losses.

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.

Tom has no position in any 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.

More on Investing Articles

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »