I hate to kick a man when he’s down, but it’s hard to imagine how things could possibly be worse for Neil Woodford – or for his customers and shareholders.
Those with investments in the suspended Woodford Equity Income Fund haven’t been able to touch their money since June. And to add insult, Woodford Investment Management has continued to charge fees, creaming off nearly £8.2m since trading was halted.
Shocking
Investors trusted their hard-earned money to someone who has failed them badly, who won’t let them take any of it out, and who has the nerve to carry on charging them for the privilege. I think that’s a disgrace, and if there’s a shakeup needed in investment management regulations, I think we’re looking at one right here.
An increasing number of commentators are calling for Woodford’s Equity Income Fund to simply be liquidated and the cash handed back to investors, and I wholeheartedly support that. After all, no matter what his positions might look like when he’s finished his rebalancing act, I expect a huge number will be taking what’s left of their cash out as soon as they can anyway.
Toxic assets
Woodford Patient Capital (LSE: WPCT) shareholders at least have the option of selling their shares. While Woodford is in the process of also moving much of the trust’s assets away from what I’ve seen described as a “toxic mix” of unquoted companies, frustrated shareholders have not been prepared to wait for him, and the share price is now down 57% in the past 12 months.
To decide whether we should consider buying WPCT shares now, we need to shine a light on the trust’s net asset value (NAV). As of close of play on 9 October, NAV stood at 65.02p per share, and with a share price at the time of writing of 36.1p, we’re looking at a discount of 44%. That’s big.
Unquoted chaos
We’ve been plagued by a stream of NAV revaluations in the months since the wheels came off Woodford’s investing strategy, and they seem to keep revising the figure downwards as one after another of those unquoted firms has hit problems and had its valuation reduced.
A year ago, WPCT was touting a NAV as high as 97.69p per share, so that’s a 33% fall in the value of all those ‘jam tomorrow’ prospects Woodford had been investing in.
Now, I know my own investing record has not been up with the Buffetts of this world, and I’m definitely not someone who should be running a professional investment fund, but even I have never suffered a 33% fall in one year.
Results
At interim results time in September, we read the ominous statement that the “board continues to evaluate the position of the portfolio manager and remains in dialogue with other potential managers.” There’s a growing call for Woodford to be replaced. Brian Dennehy, managing director of Fund Expert, recently said “I am afraid to say that the Woodford brand is finished.”
Sadly, I think he’s right, and that Woodford should go.
In the meantime, what am I doing about WPCT shares? I’m keeping them at a safe distance, once again employing my trusty bargepole – which seems to be my most valuable investing tool at the moment.
