Woodford’s disappointing performance continues in 2017

Neil Woodford

The Woodford Equity Income fund has suffered a negative start to the year with AstraZeneca and Next the biggest detractors from performance.

The £9.3bn fund has delivered negative 2 per cent in the year to date compared to negative 0.3 per cent in the FTSE All Share.

It follows a disappointing 2016, when the fund delivered 3.3 per cent compared to 16.8 per cent in the FTSE All Share. Earlier today Charles Stanley Direct confirmed that the fund was among its most sold in January, although it also was the second most bought.

The team remains cautious on the outlook for the global economy, head of investment communications Mitchell Fraser-Jones said in a monthly update for investors.

“We remain sceptical about the notion of imminent ‘reflation’ which has gripped financial markets in recent months and dominated market behaviour.”

Despite the negative performance, the fund used share price weakness to increase positions in Next and AstraZeneca, Fraser-Jones says.

Fraser-Jones says there were no “untoward” developments at AstraZeneca, but that sentiment towards it suffered when rival Bristol-Myers Squibb announced that it would not be seeking accelerated approval for an immuno-oncology combination asset as a new therapy for lung cancer.

This led some analysts to worry about AstraZeneca’s similar Mystic trial.

The fund is still positive on Next despite cost inflation and the growing threat from online rivals clearly having an impact on the stock.

“It is an extremely well-managed, disciplined company with a well-invested asset base and healthy cash generation. Moreover, it returns the vast majority of its free cash flow to its shareholders,” Fraser-Jones says.

The largest positive contributers to the fund were its tobacco holdings as British American Tobacco moves to crystalise its takeover of Reynolds American.

The fund introduced a new position in the Honeycomb Investment Trust, a specialist lender focused on consumer and small-to-medium enterprises sectors.