Fund manager Neil Woodford has been selling down exposure to tobacco, a sector that he has invested in for the majority of his career. He explains why.
Fund manager Neil Woodford of Woodford Investment Management made a number of key buys and sells within his three portfolios during the month of June.
The big news is that within CF Woodford Equity Income and Income Focus he has sold his position in British American Tobacco (BATS), which has been in both funds since their inception and, indeed, a part of his mandates for most of his career.
Woodford believes the sector is now starting to look fully valued. His team points out that at the peak of the dotcom bubble in March 2000, you could have bought BAT for only 225 per share. Woodford just sold his at over £50 per share.
He retains some tobacco exposure through Imperial Brands (IMB), which he believes is still undervalued, although "the valuation opportunity elsewhere in the sector has largely played out".
At the same time in the Equity Income fund he has added to domestically-focused stocks such as Barratt Developments (BDEV), British Land (BLND), Taylor Wimpey (TW.) and Lloyds Bank (LLOY), reflecting a more positive view on the UK economy.
Woodford's also increased the position in sub-prime lender Provident Financial (PFG), which continues to fall following a brutal profits warning last month.
Meanwhile, he introduced two new holdings in the shape of Morses Club (MCL), a well-fancied unsecured loan provider, and early-stage tech firm Drayson Technologies.
Within Income Focus, Woodford added a new position in housebuilder Redrow (RDW), where management has been investing in the company's future growth and cash returns to shareholders have been modest compared to other housebuilders.
He also increased the allocation to the likes of Provident Financial, Next (NXT), Hostelworld (HSW), Vodafone (VOD), Lloyds, Bovis Homes (BVS), Countryside Properties (CSP) and Stobart (STOB).
In Patient Capital Trust (WPCT) Woodford added Drayson Technologies, as mentioned above, as well as Accelerated Digital Ventures, which invests in a portfolio of early-stage digital businesses. In addition, he added to his positions in Halosource (HALO), Thin Film Electronics, Idex, Theravance Biopharma and Xeros (XSG). No disposals were made.
This article was originally published on our sister website Interactive Investor.
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