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Stock alert! Why I’m still shunning this former Neil Woodford favourite

G A Chester — Thu, 26 Sep 2019 14:58:05 +0000

Embattled fund manager Neil Woodford has been selling stocks left, right and centre. He’s desperate for cash and liquid blue-chips in his gated Â£3bn Equity Income fund in order to meet redemptions when the fund reopens.

Because he’s been selling down big stakes in smaller companies, many of their share prices are languishing at depressed levels. Circassia Pharmaceuticals (LSE: CIR), which released its half-year results today, is one example.

While I see value in some stocks Woodford has exited, Circassia isn’t one of them.Â Here, I’ll discuss its valuation and prospects, and explain why I’m continuing to avoid it.

Mutually supportive no more

The company was founded in 2006 and joined the stock market in 2014. Woodford had been a cornerstone investor from before its 310p-a-share flotation. When he launched his Patient Capital Trust in 2015, Circassia’s co-founder and chief executive Steve Harris got a side-gig as one of the trust’s independent non-executives.

With the current unfolding Woodford crisis, and questioning of the independence of Patient Capital’s non-executives, the trust announced on 2 September that Steve HarrisÂ had stated his intention to step down at the end of the month. Following the announcement, Woodford slashed his stake in Circassia from 20% to below the disclosable threshold of 5%.

Transitioning

Circassia, whose whole allergy therapeutics programme collapsed a few years ago, following the failure of its flagship treatment, has accumulated losses of over half-a-billion quid in its lifetime. It’s now trying to “transition to self-sustainability” with four other treatments.

It sells its NIOX asthma management products (currently two-thirds of group revenue) across a wide range of countries. In a deal with AstraZeneca, it also has the US commercial rights to chronic obstructive pulmonary disease treatments Tudorza (currently one-third of revenue) and Duaklir (launch imminent). Finally, earlier this year it acquired the US and Chinese commercial rights to ventilator-compatible nitric oxide product LungFit PH (potential launch in the second half of 2020) from Beyond Air.

Continuing to avoid

In today’s results, the company said it had made “good financial and commercial progress” in the first half of the year, and that it has “growth drivers in place to achieve Â£60m-Â£65m full-year 2019 revenues.” However, it reckons it needs Â£75m annual revenues to achieve positive earnings before interest, tax, depreciation and amortisation (EBITDA).

It posted an EBITDA loss of Â£12.4m in the first half of the year, but burnt through Â£19.6m cash. The latter was a result of a whopping Â£46.3m outflow from operating and investing activities, partially offset by raising cash from issuing shares and borrowing.

While management highlighted a “dramatic reduction in net cash outflow post-period-end,” at the head of the report, when we get down to the section on principal risks and uncertainties, we find: “The group has incurred significant losses since the inception of its various businesses and anticipates that it will continue to do so for some time due to the high level of expenditure required to develop its NIOX business and to promote Tudorza and launch Duaklir.”

The shares are currently trading at 16p (4.5% down on the day), valuing the company at Â£60m. It’s not expensive on the face of it, at around one times sales, but with plenty of attractively-valued and profitable small-caps around, I’m continuing to avoid Circassia for the time being.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.

Could the Hurricane Energy share price be the bargain of the year?

G A Chester — Wed, 01 May 2019 14:45:59 +0000

There’s no shortage of loss-making-but-high-potential companies on the stock market. Oil explorers and developers and pharmaceuticals and medical technology firms offer the prospect of particularly big gains for investors who identify the right company at the right price.

Of course, this is easier said than done. For every millionaire-maker there are dozens of duds. Today, I’m weighing up the potential of oil stock Hurricane EnergyÂ (LSE: HUR) and pharma player CircassiaÂ (LSE: CIR), which released its annual results today.

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Heavily backed by cornerstone investors Neil Woodford and his protÃ©gÃ© at former employer Invesco, Circassia pursued the development of a whole platform of allergy treatments that were said to build immunity quicker than existing remedies and without the risk of anaphylactic shocks. When its lead cat allergy failed a Phase III study, the entire programme collapsed.

At the height of investor confidence, Circassia was a member of the FTSE 250 index, with a share price of 350p and market capitalisation of over Â£1bn. Today, it’s on the AIM market, its share price is 31.5p (down a little on the back of its results) and its market cap is Â£118m. Its accounts show an accumulated loss of over half-a-billion quid.

However, it now has a small portfolio of revenue-generating products, including via a commercial collaboration with AstraZeneca, which has also become a 19% shareholder in Circassia. Could the stock be set to rise like a phoenix?

Recovery?

Just over a year ago, I wrote that I wouldn’t touch Circassia with a bargepole, noting also a 5.42% short position in the stock held by hedge fund Mangrove.

Today’s results showed a Â£37.2m operating loss on revenue of Â£48.3m. There are signs of promising revenue growth, and with the share price much lower than a year ago, the valuation picture has improved.

However, continued losses are forecast into next decade and Mangrove has maintained its chunky short position. I’m not convinced the risk/reward proposition with Circassia is compelling, and so continue to see it as a stock to avoid at this stage.

Share price to double?

By contrast, when I last wrote about Hurricane Energy (November 2017), I felt its progress to date, potential to become a major player in the West of Shetland region, and share price of 26.75p (market cap Â£524m) represented an attractive risk/reward proposition. The shares are currently trading at around 47p (market cap Â£921m), but I continue to see a compelling investment opportunity.

The company is on track to deliver first oil from its 100%-owned Lancaster discovery before the end of June. Planned initial production is 17,000 barrels a day, and management expects to generate over $200m in operating cash flow on a full-year run-rate basis at a $60 a barrel Brent oil price.

Meanwhile, a 50% farm-in to its Warwick and Lincoln fields by Spirit Energy, providing up to $387m, has enabled an acceleration of activity, including the drilling of three wells this year, one of which was spudded last month.

If we see the company successfully executing on this year’s work programme, I think the share price could easily double from its current level. And with total 2P reserves and 2C contingent resources across the asset base standing at 2.3bn barrels net to Hurricane, there’s potential for the value of the company to continue increasing as time goes on.

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National Grid is a FTSE 100 dividend stock I’d buy with £1,000 today

Peter Stephens — Fri, 04 Jan 2019 11:51:58 +0000

The performance of National Grid (LSE: NG) in recent months has been somewhat surprising. It has declined by around 12% since May, while the FTSE 100 has fallen by around 14% over the same time period. While it has outperformed the index, its defensive credentials would normally be expected to appeal to investors during a challenging period for the index.

Yet investors appear to be uncertain about the companyâs prospects. As such, it may now offer a margin of safety versus a number of its index peers. This could make it worth a closer look alongside another company that released an update on Friday and which has experienced a declining share price in recent months.

Improving outlook

The company in question is speciality pharmaceuticals business Circassia (LSE: CIR). It released a trading update for the 2018 financial year which showed that it has enjoyed success in implementing its cost containment strategy.

Net cash outflow for the year is expected to be less than Â£20m, with sales due to be between Â£48m and Â£52m. This follows higher Tudorza rebates in federal channels in the second half of 2018, as well as a delay in revenue recognition in China as a result of the establishment of a local subsidiary.

Circassia expects to report significant sales growth in 2019. The establishment of a direct sales operation in China could catalyse its financial performance, while it aims to launch COPD (chronic obstructive pulmonary disorder) treatment Duaklir should approval be granted in the US. While the company is expected to remain loss-making in 2019, improving financial performance could help it to reverse a share price decline of 47% in the last year.

Defensive appeal

While National Grid has thus far not proven popular at a time when the FTSE 100 has experienced a period of decline, the stock could become increasingly appealing to a range of investors. The general trend among investors in recent months has been towards increased risk aversion, and this could continue in the coming months. The prospect of a global trade war, Brexit, slowing growth in China and rising US interest rates may contribute to a desire among investors for less risky assets.

With National Grid having a business model that is less closely correlated to the wider economy than the vast majority of its FTSE 100 peers, it may be able to deliver reliable dividend growth over the medium term. It already has a dividend yield of 6%, which is historically high for the stock. And with its earnings forecasts being relatively robust and dividend growth expected to match inflation over the next few years, its income appeal appears to be high.

Certainly, the wider utility sector faces a period of regulatory change which could impact negatively upon dividend growth in the long run. But with risks facing the world economy being high today, National Grid could become an increasingly popular share during the course of 2019 in my opinion.

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Peter Stephens owns shares of NATIONAL GRID PLC ORD 12 204/473P. 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.

Should you buy Neil Woodford stock Circassia Pharmaceuticals after today’s price rise?

Alan Oscroft — Tue, 24 Apr 2018 15:20:36 +0000

My colleague G A Chester placedÂ Circassia Pharmaceuticals (LSE: CIR) firmly in bargepole territory recently, and I can see why.Â

The firm raised hundreds of millions based mainly on high hopes for its allergy treatments. But it was all for nought and the share price collapsed in June 2016 when the company’s cat allergy trial failed miserably. That was followed by the complete abandonment of its associated research after a dust mite allergy trial similarly flopped.

Neil Woodford, who holdsÂ Circassia in hisÂ Equity Income Fund, saw the rump of the company worth holding on to after the disaster. But who’d want to buy? Well, perhaps those who actually like the look of what is now a very different company, focusing on respiratory diseases, including asthma and COPD. Results for 2017, released Tuesday, looked promising to me and gave the shares a 3% boost.

The company saw sales of its NIOX asthma treatment rise by 18% to Â£27.3m, with direct clinical sales (excluding research sales) up 26%. The international appeal of the product was apparent, with rises in clinical revenues of 34% from the US (27% at constant exchange rates, CER) and 44% from China (36% at CER).

Partnership

Perhaps ironically, while Neil Woodford has been pruning his holding in AstraZeneca, it’s with that very pharmaceuticals giant that Circassia’s biggest promise for its COPD treatments currently lies. ItsÂ US commercial partnership is said to be progressing well, after a deal was finalised back in April 2017 for the two productsÂ Tudorza and Duaklir. The remainder of the year brought in Â£19m inÂ profit share revenues andÂ Duaklir‘s phase III studyÂ met its primary endpoints with AstraZeneca set to make an NDA submission this year.

The company still recorded a loss of Â£99.1m, although that’s down from Â£137m a year ago, with revenues of Â£46.3m almost exactly double the 2016 figure. Year-end cash dropped to Â£59.5m from Â£117.4m, so there’ll have to be questions over where funding is going to come from until the company reaches profitability.

But chief executiveÂ Steve Harris did point to 2018’s expected “full year’s contribution from our enlarged US sales team and our collaboration with AstraZeneca, ‘locking in’ significant growth potential.“

So if you go for ‘jam tomorrow’ young companies, I think you could do a lot worse.

Buy the strategy?

If you do fancy this kind of investment, you could buy intoÂ Woodford Patient Capital Trust (LSE: WPCT), which aims at identifying tomorrow’s winners.

But there are plenty of reasons I share fellow Fool Harvey Jones’s aversion, especially after reading Tuesday’s full-year report. For one thing, it starts off with a big failure in Prothena, which revealed on Monday that its NEOD001Â trial has failed to meet its primary endpoint and the Al Amyloidosis treatmentÂ will be abandoned.

The fund’s net asset value (NAV) declined by 1.6% during the year to 91.73p, which is mildly disappointing and at 77p, the shares are selling at a discount to NAV of around 16%. That’s not a vote of confidence from the markets.

I’m also turned off by the fund’s top-heavy investment in four flagship companies (includingÂ Purplebricks, which I think is overvalued). So there’s really not that much diversification after all.

Finally, this kind of high-risk strategy is not in line with Woodford’s traditional expertise, which lies in understanding top-quality blue-chip companies. It’s definitely not for me.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.

2 Neil Woodford stocks I wouldn’t touch with a bargepole

G A Chester — Tue, 13 Feb 2018 08:07:38 +0000

Neil Woodford-backed Circassia Pharmaceuticals (LSE: CIR) raised Â£191m at 310p a share and had a market capitalisation of Â£600m when it listed on the stock market in 2014. It was lossmaking but had high hopes for a range of allergy treatments it was developing.

In 2015, it raised a further Â£263m to fund two acquisitions. One gave it infrastructure in key markets for the commercial launch of its allergy treatments (“once approved”) and the other gave it a pipeline of complementary products in the respiratory diseases space.

Unfortunately, its flagship cat allergy treatment failed a Phase III study in 2016. And after its house dust mite treatment also failed, it abandoned its entire allergy programme. It was left with its respiratory products and a deal for certain commercial rights to two AstraZeneca products. The shares are now trading below 100p and its market cap is about half that of its flotation.

Testing patience

Circassia was at one time a top 10 holding in Woodford’s Patient Capital Trust but he shifted it into his Equity Income fund last August at a time when he was increasing Patient Capital’s exposure to riskier unquoted stocks. Not that Circassia isn’t risky. It’s never made a profit and analysts are expecting an Â£86m pre-tax loss on revenue of Â£47m when it posts its results for 2017. And losses are forecast to continue for the foreseeable future.

Due to the uninspiring history and lossmaking outlook, I view Circassia as a stock to avoid at this stage. I also note that a hedge fund (Mangrove Partners) has increased its position significantly over the last 12 months, from below 2% to 5.42%. I’m not privy to Mangrove’s thesis on Circassia but it tells us: “We focus on companies that are executing a flawed business plan or strategy, engaging in fraud, or capitalizing on a fad.”

Frankenstein creation

Another Woodford-backed company on my list of stocks to avoid is BCA Marketplace (LSE: BCA). Not all companies grow from small acorns. Some Â£1bn businesses are constructed within the blink of an eye. Team an entrepreneurial executive with a corporate finance house, and heavyweight backing from City fund managers and banks, and a new industry giant can be conjured by buying up a clutch of existing businesses.

BCA is one such company. An AIM cash shell in 2014, it’s now a Â£1.4bn FTSE 250-listed group. It’s a major player in the secondhand vehicle industry, with businesses across the market. I’m not keen on Frankenstein creations of this type. They’re often launched in a ‘hot’ sector and if the sector is cyclical, there’s every risk of overpaying for assets at the top of the cycle. I fear this could be the case with BCA.

The group reported rising revenue and profit in its half-year results in November but as my Foolish friend Roland Head noted, the car market looks like it could be heading for a downturn. BCA’s net debt of Â£287m may not seem too onerous but I see considerable risk behind the face of the balance sheet (and off it) in the event of a downturn.Â A forecast P/E of over 16 at a share price of 167p offers an insufficient margin of safety for the risk, in my view. I also note that four hedge funds have disclosed short positions in the stock, totalling 2.35%.

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G A Chester 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.

2 future growth stocks I’d buy today

Alan Oscroft — Fri, 27 Oct 2017 14:12:32 +0000

Should you invest in companies that are not yet in profit? It can be very risky, but today I’m looking at a couple of candidates.

Science in Sport (LSE: SIS) is one that appeared on my radar last year when I took up cycling again after a long break, and how things had changed. Out were baggy ‘Famous Five’ shorts and sausage butties for lunch, and in were lycra and energy gels.

In fact, sports nutrition is becoming big business, and that’s whatÂ Science in Sport does. You can see it everywhere after a big sporting event like the Olympics, and sales of all kinds of gels, energy bars, and scientifically formulated hydration products (ie drinks) all soar.

The Tour de France helped, and when I see groups out cycling they’re all wearing team gear and slurping down those horrible gels — I tried one once and I thought it tasted of sick, but I’m not a target customer.

Sports everywhere

There’s the London Marathon too, with competitors trying to squeeze out every last smidgeon of performance they can.

Science in Sport doesn’t make any profit yet and still has losses (albeit narrower losses) pencilled in for the next two years. But on Friday it announced two new deals, a three-year one withÂ USA Triathlon to target growth in the US market, and a partnership withÂ Rock ‘n’ Roll Marathon Series to be the “official supplier of its patented isotonic energy gels at all 30 race series.“

The risks are huge — market cap of only Â£27m and still in the cash-burn stage — so be very careful if you choose to make an investment. But with the shares at 72p, I’m cautiously optimistic.

Medical prospect

Shares inÂ Circassia Pharmaceuticals (LSE: CIR) crashed in June 2016 when a cat allergy phase III study failed miserably — the candidate immunotherapy treatment did no better than a placebo.

Since then,Â the company has reinvented itself and now focuses onÂ respiratory diseases, including asthma and COPD. Those are growing problems in the industrialised west, surely offering great potential for anyone coming up with effective treatments.

September’s interim results looked encouraging to me, reporting an increase in revenue of 65%, to Â£18.3m, with R&D expenditure upped to Â£27.2m. The latter is particularly exciting as it includes a Â£14.6m contribution to the firm’s collaboration with sector giant AstraZeneca. Announced in March, the deal secured certain US commercial rights to the COPD treatments Tudorza and Duaklir.

Sales of the firm’s NIOX asthma diagnostic product were up 19% at the halfway stage, with US clinical sales up 39%.

Sufficient cash

With Â£82.9m in cash at 30 June, there appear to be no liquidity problems at present, but questions over profits remain. There are none forecast for this year and next, though losses per share are forecast to fall sharply, so could we see some in 2019?

At 84p today, the shares have continued down, which is disappointing. And it is another very risk investment, as it doesn’t take much going wrong to destroy a company that’s not yet in profit.

But Neil Woodford has held on to his Circassia shares and clearly still sees something attractive there, and I’m with him. What I really want to see is full-year results for 2017, and the first signs of 2019 forecasts.

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2 turnaround stocks that could make you rich

Bilaal Mohamed — Wed, 27 Sep 2017 16:39:40 +0000

Circassia Pharmaceuticals (LSE: CIR) announced its half-year results this morning, offering up a significant narrowing of losses after switching its primary focus from allergies to respiratory disease. The company revealed that for the six months to 30 June, revenues had increased by 65% to Â£18.3m, with losses shrinking to just Â£34.3m from Â£101.8m a year earlier.

A new lease of life

The Oxford-based speciality pharmaceuticals business sells its novel, market-leading NIOX asthma management products directly to specialists in the UK, US, and Germany, and in a wide range of other countries through its network of partners. The company has also recently established a promising collaboration with AstraZeneca in the US in which it promotes the chronic obstructive pulmonary disease (COPD) treatment Tudorza, and has the US commercial rights to late-stage COPD product Duaklir.

Throughout 2017, Circassia has continued to build on the changes it began last year following the disappointing phase III results for its lead allergy product. Since then, the company has halted investment in the allergy field, significantly expanded its commercialisation platform, and completed a major commercial transaction with AstraZeneca. With a period of dramatic change behind it, Circassia now has a strong commercial infrastructure, growing revenues, advancing pipeline and a robust balance sheet.

All of which is good news. But the companyâs shares have yet to recover from last yearâs disappointing clinical trials. However, I have hope for the future. The change in focus and partnership with AstraZeneca makes me optimistic that this new lease of life can transform Circassia into a profitable business, and propel the share price back to where it truly belongs.

Poised for a comeback

Despite Circassiaâs long-term potential, risk-averse investors may nevertheless steer well clear of what is essentially a small-cap pharmaceuticals business that has yet to prove it can turn a profit. Such investments are not exactly the bedrock of a solid retirement portfolio.

Perhaps a more comfortable option for growth-focused investors would be Hikma Pharmaceuticals (LSE: HIK).

But Hikma has had its challenges. The FTSE 250 firmâs share price has been knocked back in recent months with investors concerned about the intense levels of competition for generic drugs in the US. The impact has been dramatic, withÂ the shares now trading a whopping 57% lower than last summer’s peak of 2,676p.

Poised for a comeback?

Yet Hikma is much more than just a generic drugs firm, with its injectable and branded drugs businesses contributing 65% to overall group revenues during the first half of 2017.Â Geographical diversity should also help to offset fierce competition in the US. The group is a market leader in the Middle East and North Africa region, as well as having significant sales in Europe and the rest of the world. This geographical diversity should help to counter the effects of tougher competition across the pond.

With an uncharacteristically low price-to-earnings ratio of 15, I believe Hikmaâs shares could be well-poised for a dramatic comeback.

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Bilaal Mohamed has no position in any shares mentioned.Â The Motley Fool UK has recommended AstraZeneca and Hikma Pharmaceuticals. 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.

2 recovering growth stocks to help you achieve financial independence

Alan Oscroft — Wed, 09 Aug 2017 12:55:44 +0000

Shares in Quantum PharmaÂ (LSE: QP) had already been falling when a shock profit warning at first-half results time in October saw a further 50% knocked off the price.

Incoming chief executive Chris Rigg had launched a major operational review, and a trading update Wednesday showed just how far the company has come — impressing the markets enough for a 6% share price rise to 58.5p on the day.

Non-core activities have been dumped as the firm has been refocusing on its Niche Pharmaceuticals business, which is now described as “a highly profitable division” with an improving development pipeline.

With plans to expand internationally, Quantum is apparently ahead of its strategic plan — and that plan has already resulted in an improved financial performance and higher overall margins.

Net debt was slashed in half by the time the full year was reported in May, thanks to a Â£15m placing, and the lossmaking NuPharm being closed, though the company did report a pre-tax loss of Â£10.9m.

From the ruins

In short, the new Quantum Pharmaceuticals looks like a very different entity to its first incarnation from its original flotation in 2014, but I don’t think the markets have yet woken up to the potential of the regenerated company.

Forecasts indicate a return to profit for the year to January 2018, with earnings growth of 32% pencilled in for the following year, sending the P/E down as low as 14 and giving us a PEG of just 0.45. To me, that’s a very attractive valuation for a company with these growth prospects.

Those who bought in the dip after last year’s price crash will have seen their investment rise by close to 70% by now, but I reckon there’s still time to grab a bargain.

A Neil Woodford bargain?

In biotechnology probably more than anywhere, early promises often fail and the risks come home to roost. That much is clear from Circassia Pharmaceuticals (LSE: CIR), a growth prospect that top investor Neil Woodford bought a chunk of.

But the firm’s big promise, a cat allergy vaccine, failed in its phase III trials. That was followed by a dust mite allergy study failing to meet its phase IIb primary endpoint in April this year, bringing to an end the company’s investment in allergy research.

Since the bad news hit,Â Circassia shares have lost two-thirds of their value, as early growth investors fled. But Neil Woodford didn’t sell, seeing value in what was left of the firm at its new low price — and there’s actually still quite a lot left.

Impressive portfolio

The firm has a range of successful respiratory treatments, and has signed up with AstraZeneca to commercialise two of its COPD products in the US — and its US sales force is ramping up as a result.

Sales of asthma management product NIOX are growing too, up to Â£23m in 2016, and chief executive Steve Harris reckonedÂ Circassia is heading to become a “world-class, self-sustaining specialty pharmaceutical business.“

All of this promise will count for nought if we never see any profits, and there are none on the analysts’ radar for this year or next. But Mr Woodford has said that he sees the firm as being “very well-financed” and thinks he sees “long-term value in the shares.“

For me that cements Circassia as a buy.

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Alan Oscroft 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.

3 stocks you can buy today for up to 70% less than Neil Woodford paid!

G A Chester — Mon, 28 Nov 2016 12:21:55 +0000

I’ve been running my eye over ace investor Neil Woodford’s portfolios, looking for potential bargains. Here are three stocks you can buy today at up to 70% less than he paid.

Hedge fund attack

FTSE 250 firm Allied Minds (LSE: ALM) commercialises intellectual property coming out of US universities and government research labs, supporting its portfolio of businesses with capital, central management and shared services.

Woodford has bought a number of tranches of shares in Allied over the years, including in May 2015 when they were trading at around 600p (giving the company a market capitlisation of Â£1.3bn). The Woodford website published a bullish blog post on the company just prior to this purchase.

In September 2015, when the shares were 499p (market cap Â£1.1bn), Allied was attacked in a scathing report by New York hedge fund Kerrisdale Capital as “a dressed-up collection of high-risk, low-reward gambles that we believe has at least 70% downside.”

Woodford was unconcerned by the report and has continued to support Allied with further investment. The shares are currently 367p (market cap Â£794m). The Kerrisdale analysis has its flaws, but some of the issues it raised have left me uneasy. I’d suggest investors need to satisfy themselves that there’s no merit in Kerrisdale’s arguments before considering an investment in Allied.

Pipeline setback

Woodford more than doubled his stake in Circassia Pharmaceuticals (LSE: CIR) by participating in a fundraising at 288p (market cap Â£820m) in June 2015.

A year later, Circassia’s shares crashed on the failure of a phase III study of its flagship cat allergy vaccine. This led the company to put the development of its allergy portfolio on hold while awaiting results of a phase III study of its other advanced allergy vaccine — for house dust mites — in spring 2017.

Woodford posted his response to the disappointment, highlighting that Circassia has other “very attractive respiratory products both in the market and under development”, that it “remains very well-financed” and saying “we remain supportive shareholders and from here, we continue to see long-term value in the shares”.

Circassia was demoted from the FTSE 250 to the SmallCap index in September and its shares are currently trading at 84p (market cap Â£239m), which is 6.6 times forecast revenue for 2017. I’m inclined to think it wise to wait for the upcoming results of the house dust mites vaccine study before considering an investment here.

Speculative buy

Regenerative medical devices company Tissue Regenix (LSE: TRX) has neither come under attack by a hedge fund nor suffered a major pipeline setback. Woodford bought a big slug of shares in this AIM-listed company two years ago when they were trading at around 23p (market cap Â£150m). You can pick them up today at 17p (market cap Â£129m), so a 26% discount on share price and a 14% discount on market cap.

The company is valued at 7.7 times forecast revenue for 2017 and with another encouraging product update this morning, including prospects for rapid commercialisation, there is plenty of scope for upward revisions of analyst revenue forecasts in the coming year and beyond. Based on the quality of its products and the size of its potential markets, I rate Tissue Regenix as one of the more promising higher risk, speculative buys aroundÂ today.

The post 3 stocks you can buy today for up to 70% less than Neil Woodford paid! appeared first on The Motley Fool UK.

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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.

Has Brexit created the perfect opportunity to buy Woodford Patient Capital Trust plc?

G A Chester — Tue, 05 Jul 2016 11:02:32 +0000

When master investor Neil Woodford launched a growth fund in April last year, loyal fans flocked to get a piece of the action. If he could deliver market-thrashing returns from staid blue chips, imagine what he might be capable of if he applied his skills to the early-growth and early-stage companies thatÂ were to form the majority of his new Woodford Patient Capital Trust (LSE: WPCT).

Unprecedented demand

Raising Â£800m at 100p a share, Woodford Patient Capital became the biggest investment trust launch in history. Such was the continuing demand after launch that the shares immediately began trading at a premium to net asset value (NAV). And In the first six months the trust issued a further 27m shares at prices of up to 117p, despite the NAV only ever getting as high as 105p.

In volatile markets this year, the NAV has fallen significantly — and the shares have fallen even further. The lasted reported NAV (on Friday) was 88p, while the shares are trading at 81p as I write, giving an 8% discount.

Patient capital

Despite Woodford emphasising the very long-term nature of the strategy in the literature of the trust — as well as in the name — the move from a hefty premium to NAV to a discount suggests that some investors have quickly become impatient or got cold feet.

Perhaps it hasn’t helped sentiment that Woodford has disposed of the trust’s smattering of familiar blue chip names in recent months — the likes of GlaxoSmithKline, AstraZeneca and Legal & General — to put more money into smaller companies. And there have been a few disasters among his early-stage and early-growth picks.

Faith

As of 31 May, Woodford Patient Capital’s top six holdings consisted of three unquoted companies, a Nasdaq-listed business and two London-listed companies — one in the FTSE 250 and one on the Alternative Investment Market (AIM). None of them are currently profitable.

The FTSE 250 firm, Circassia Pharmaceuticals (LSE: CIR), suffered a major setback a fortnight ago, announcing disappointing results from a phase III study of its flagship cat allergy treatment. The shares dived 62%. Even so, the company, which made a Â£66m operating loss last year, is valued at Â£280m, or 26 times sales.

Circassia demonstrates that investors need to have faith that Woodford won’t pick too many disasters in the higher-risk area within which the trust operates (although some are inevitable) and to trust his judgement on the intrinsic value of what are hard-to-value businesses.

AIM-listed Purplebricks (LSE: PURP) has delivered good news to date, but again is currently lossmaking (a Â£12m operating loss last year) and highly valued at 18 times sales.

This disruptive ‘hybrid’ estate agency, like so many of Woodford Patient Capital’s investments, is a potential game-changer in its area of business and could come to be worth considerably more than its current market value, if Woodford is right.

Time to buy?

Faith in Woodford — and patience — are prerequisites for buying into Woodford Patient Capital and now could be a fantastic time to invest. If Woodford delivers you’ll benefit not only from a strongly rising NAV from the current depressed level, but also a likely extra boost from a closing of the discount to NAV or even a move back to a premium.

The post Has Brexit created the perfect opportunity to buy Woodford Patient Capital Trust plc? appeared first on The Motley Fool UK.

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