Woodford drops British American Tobacco

Neil Woodford has dropped British American Tobacco from both his Equity Income and Income Focus funds.

The disposal represents the end of a stock that Woodford has held since before the Dotcom bubble and has been part of his Woodford Equity Income fund since its inception three years ago.

Woodford sold the stock to continue his bet on the UK economy.

Tobacco has been the best performing sector in the UK stock market over the last two decades as a combination of dividend income, dividend growth and, over time, a re-rating to more appropriate valuation territory, says Woodford head of investment Mitchell Fraser-Jones.

He notes that British American Tobacco was just £2.25 per share when Woodford, then at Invesco, significantly increased his exposure in the sector. The fund disposed of the holding at over £50 per share.

The Equity Income fund increased the positions in Barratt Developments, British Land, Taylor Wimpey and Lloyds. It also took advantage of price weakness to add to the fund’s position in Provident Financial.

The three-year old fund also initiated small holdings in short-term loan business Morses Club and unquoted internet of things company Drayson Technologies.

The Income Focus fund increased positions in Hostelworld, Vodafone, Lloyds, Bovis Homes, Countryside Properties and Stobart among others. It also added to Provident Financial due to share price weakness as well as Next.

The fund, which launched in April, initiated a position in UK housebuilder Redrow.