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Woodford: stand by for 'thick and fast' profit warnings

Invesco Perpetual’s star fund manager Neil Woodford has warned investors to stand by for more profit warnings, which will come ‘thick and fast.’

 
Woodford: stand by for 'thick and fast' profit warnings

Invesco Perpetual’s Neil Woodford has warned investors to stand by for more profit warnings, which will come in ‘thick and fast.’

The Citywire A-rated manager, speaking to shareholders in the Edinburgh Investment Trust, said the potential for these warnings could suppress fragile markets.

‘The answer for the overall market is that I struggle to see how the market can make such headway, but within the market there is a lot of opportunity,’ Woodford said, who also manages the Invesco Perpetual Inome and High Income funds.

He explained the accumulation of weak economic data and downgrades across the world in terms of GDP (gross domestic product) is set to be reflected in further downgrades to both profits and earnings.

‘There is earnings risk in the market, and I have talked about this in the past,’ said Woodford. ‘However, I still believe there is a lot of valuation opportunity as well.

‘I have said consistently that despite these difficult economic times, there is a population of stocks that can grow consistently through this difficult period. So I believe there is valuation opportunity,’ he added.

Woodford said businesses that feature prominently in his trust’s portfolio are those that can deliver revenue, cash flow earnings, and dividend growth on a consistent basis.

In terms of Europe, Woodford said the underlying weakness of the Continent will likely get worse.

‘The reason it is getting worse is that we have a combination of monetary and fiscal headwinds, which are getting harder, not weaker,’ he said.

The manager added: ‘It is hard to see how the eurozone crisis will be resolved. You have to attach some probability to a eurozone breakup. You also have to attach some probability to a move to more integration.

‘But either way it is likely to be coincident with poor economic performance.’

Woodford’s view is that it is still possible for high quality businesses with consistent growth to break free from the challenging backdrop. ‘That is why my strategy remains unchanged,' he told Edinburgh Investment Trust shareholders.

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4 comments so far. Why not have your say?

joe stalin

Jul 23, 2012 at 08:21

So what do we do then sell or buy? Strikes me that Mr woodford is sitting on the fence. With pension management fees finally and not before time in the spotlight I wonder how much his firm is charging for this sort of advice.

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MARK LOCKYEAR

Jul 23, 2012 at 08:57

WICH WAY IS THE WIND BLOWING TODAY.?

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martin roach

Jul 23, 2012 at 09:54

I'd have thought he is saying evaluate what you hold/buy as some companies will weather the storm well. That's the trouble with this investing malarky, you have to crunch the number but I don't have the time/inclination.

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Rob Voller

Jul 25, 2012 at 06:35

Mr. Roach is right. Neil Woodford is simply reassuring his customers that, in the long term, they have nothing to fear by holding on to their investments in his funds. He is a consistent long term performer and is well worth listening to.

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