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Why Woodford's head was turned by 8 'exciting' firms

Invesco Perpetual’s Neil Woodford is known for his big, defensive bets, but the manager also puts money to work in smaller start-ups.

 
Why Woodford's head was turned by 8 'exciting' firms

Invesco Perpetual’s Neil Woodford is well known for his liking of large, defensive companies paying good dividends, like GlaxoSmithKline (GSK.L) or BAE Systems (BAES.L). What is less well known is that the manager also invests in smaller, start-up companies, providing them with much-needed funding and potentially giving his investors exposure to some long-term winners.

Speaking to Citywire, the firm’s UK equities product director William Deer said the High Income and Income funds had 21 small and unlisted companies amounting to around 4% of the portfolios.

‘In the tail, we’re looking at interesting businesses that can generate significant returns,’ said Deer.

‘We hold e-Therapeutics, for example. This group issued more equity in February, so we took up our holding,’ said Deer.

He explained firms such as e-Therapeutics (ETXP.L), a network pharmacology company, can spend money on research and development more efficiently than some larger firms.

‘What some of the larger pharmaceutical companies have failed to do is illustrate how they have converted research and development to on-market drugs,’ said Deer. ‘It’s the decisions of 10 years ago that are having an impact today.’

The biggest issue for these smaller, start-up firms, however, is funding, which is where Woodford (pictured) provides support.

‘By providing patient long-term capital, they can develop drugs before having to phone the big pharmaceutical companies for funding,’ said Deer. ‘Funding is the biggest obstacle.’

The manager invests in Imperial Innovations Group (IVO.L), IP Group (IPO.L) and Allied Minds, all three of which provide access to the intellectual property of university research that points to some of these start-up companies with potential.

In biotechnology, ‘We have EvoFem, which has been hugely successful, with 300% return on initial investment,’ said Deer. The privately held company specialises in treatments for women.

‘We invest in Nexium, a Lithium battery technology group, which is performing very well.’

He also noted Circassia, a speciality biopharmaceutical company focused on developing immunotherapies, as a smaller company they are excited about, as well as AJ Bell, the stockbroker behind the Sipp Centre.

Citywire A-rated Woodford has one of the best long-term records of fund managers in the country. Over 10 years his High Income and Income funds rank first and third in the UK Equity Income sector, having grown investors' money by 287% and 283% respectively.

3 comments so far. Why not have your say?

doug186

May 01, 2013 at 21:30

An interesting article. I printed a copy. However, when I came to read the printed copy, I found that there were 7 insertions of 5 lines each a bout "Add to favourites". Surely putting one insertion should have been enough. Such behavior is puerile.

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Patrick Lynch

May 04, 2013 at 10:14

This man has been producing fantastic results for my pension fund for many years. Listen to what he says.

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dominic lloydsbod

May 04, 2013 at 20:34

I too am a big Woodford fan, and despite occasional 'flat' patches his funds have done me very nicely over 15+ years of investing. Interesting article about how he gingers up the Funds' performance by smart investments at the smaller company end.

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