Citywire printed articles sponsored by:


View the rest of this gallery online at http://citywire.co.uk/wealth-manager/gallery/a709818

Under the Barnett: Four top ideas from Woodford's successor

Sponsored By:

by Robert St George on Oct 16, 2013 at 11:51

Neil Woodford’s fondness for tobacco and pharmaceuticals is well known. But what of Mark Barnett, the man stepping into his shoes? Wealth Manager reveals some of his favourite stocks.

Neil Woodford’s fondness for tobacco and pharmaceuticals is well known. But what of Mark Barnett, the man stepping into his shoes? Wealth Manager reveals some of his favourite stocks.

BT

The largest holding across Barnett’s funds is BT, despite the group’s turnover having fallen in each of the past five years. But Barnett – in what he has acknowledged is a ‘bold bet’ – has tipped the decline to reverse now BT has spent £2.5 billion, equivalent to its entire pre-tax profit, rolling out its high-speed fibreoptic network.

Barnett expects customers to prove willing to pay more for this speedy internet access, but is assured too by BT’s rigorous cost-cutting programme. He estimates that in the past five years, BT has saved more than over the course of the previous 25 years combined. This has helped the firm more than double profits since 2010, despite the lower revenues, and its dividends have climbed by a third as well.

Thomas Cook

The greatest contributor to Barnett’s performance over the past year has been Thomas Cook, shares in which have gained almost 800% since last October. Barnett believes you find such opportunities ‘once or twice in your career’.

He initiated the position after Thomas Cook shares plunged by 80% in 2011 amid several profit warnings while the Arab Spring deterred holidaymakers from North Africa. The stock promptly lost another three-quarters of its value when Thomas Cook announced it might miss interest payments on its borrowings.

Undeterred, Barnett probed and discovered that Thomas Cook’s creditor was the Royal Bank of Scotland: he wagered that a government-owned bank wouldn’t allow a well known name to collapse. He duly added to his holding.

He now believes it will start paying a dividend within 24 months.

Fusion IP

Barnett has nevertheless taken some profits from Thomas Cook and redeployed them into two relatively unknown small-caps. One is Fusion IP, which works with universities in Sheffield (pictured), Nottingham, Swansea and Cardiff to commercialise their intellectual property.

Imperial Innovations

The other is Imperial Innovations, which does the same with the universities of Cambridge (pictured) and Oxford plus University College London and Imperial College London.

Barnett describes such companies as ‘the last value pool’ in the market, and laments that they have been regarded as ‘a backwater’ for other investors.

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

More about this:

Look up the funds

Look up the shares

  • BT Group PLC (BT.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Thomas Cook Group PLC (TCG.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Fusion IP PLC (FIP.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Imperial Innovations Group PLC (IVO.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the investment trusts

  • Keystone (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Invesco Perp Select UK Equity (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Perpetual Income & Growth (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Neil Woodford
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Mark Barnett
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Archive

Sorry, this link is not
quite ready yet