Of course, beefed-up marketing campaigns haven’t come cheap and are the reason pre-tax losses doubled to £10.5m. However, as seen with the jump in revenue, increased awareness has filtered through to higher sales and management expects to turn its first profit in fiscal year 2017. This would be a huge step for a company that is barely two years old and still has massive disruptive potential for the stodgy traditional estate agent model.

Purplebricks, rather than taking a commission on each property sale of up to 2.5%, offers simple flat-fee packages that are payable whether or not the sale goes through. The low fixed fees combined with the benefit of working with a self-employed local estate agent is what sets Purplebricks apart from both traditional agents and other online-only competitors. If the company can keep up the pace of breakneck growth, maintain 60%-plus market share among online competitors, and doesn’t rush its planned expansion into Australia, Purplebricks definitely has a place on my watch list.

Biotherapeutics

Neil Woodford’s interest in disruptive companies is also apparent with his 24% stake in biotherapeutics firm 4D Pharma (LSE: DDDD). Biotherapeutics is a burgeoning field that seeks to harness the benefits of live organisms such as gut bacteria to treat a variety of illnesses that have thus far defeated traditional pharmacology.

4D’s initial focus has been on gut bacteria and diseases in the related area, such as Crohn’s, colitis and irritable bowel syndrome. Progress has been picking up lately and the company now has several of its 15 treatments progressing through clinical trials.

Despite currently having no revenue, 4D is well placed to continue investing in its pipeline due to £85.4m in cash against total annual pre-tax losses last year of only £10.1m. But while the company’s financial position is appealing and biotherapeutics have massive upside, investing in a small pharma company that currently has no approved products or revenue is just too risky a proposition for me.

Trust in Woodford?

It’s a similar story for another of Neil Woodford’s most concentrated holdings, his 21% stake in Imperial Innovations (LSE: IVO). It has ties with universities and researchers across the UK and invests in start-ups in industries as varied as novel oncology treatments to remote sensors for oil & gas facilities.

With stakes in 38 companies, many of them early stage private ventures, investing in Imperial Innovations requires placing high amounts of trust in the fund managers to choose their investments well. Without the expertise necessary to judge the prospects of starts-ups focused on everything from the treatment of viral infections after bone marrow transplants to next generation lithium ion batteries, Imperial Innovations isn’t at the top of my buy list despite Neil Woodford’s bullishness.

The post Should you buy Neil Woodford’s favourite small caps Purplebricks Group plc, 4d Pharma plc and Imperial Innovations Group plc? appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This solid performance has come despite a slowdown in defence spending from its largest customers, the US and UK, during the drawdown of the wars in Iraq and Afghanistan. However, now that spending in these two markets and Saudi Arabia, its third largest customer, are picking up once again, analysts are expecting a slight uptick in earnings over the next two years.

With an order backlog of £36.8bn, revenue should continue to increase, albeit slowly due to the lumpy nature of defence contracts, over the next few years. Investors shouldn’t expect runaway growth, but shares trade at a relatively sedate 12.4 times forward earnings and offer a safely covered 4.5% yield. BAE certainly won’t be a great growth share, but the company proved during the latest downturn that management can cope with falling defence spending just fine.

Hybrid hopes

One growth share that Woodford is bullish about is hybrid online estate agent Purplebricks (LSE: PURP). It offers property sales for low fixed fees rather than a percentage of the final sale, which is why the fees clock in at roughly a quarter of the national average. This has proved to be a compelling offer for price-conscious sellers as Purplebricks now controls roughly 60% of the online-only market, despite being only two years old.

The company’s competitive advantage comes from the 165 local agents it works with across the country. These agents are self-employed, freeing Purplebricks from high wage bills and expensive high street offices. While this makes Purplebricks slightly more expensive than pure online-only companies, it provides customers with the peace of mind of a local agent to help them through a momentous decision.

Despite racking up a significant loss in its latest reporting period due to high marketing spend, the company is in good financial shape and analysts are expecting it to turn its first profit next year. With only 5% of the estate agency market going to online agents currently, Purplebricks has significant room to grow in the coming years.

Understand your investments

Woodford’s funds also own nearly 20% of Imperial Innovations (LSE: IVO), which seeks to commercialise academic research from Imperial College London and other universities. After a recent share placement, the company has a war chest of £238m to invest beyond the 105 companies it currently has in its portfolio.

Several of these investments, including its 9% ownership of FTSE 250 constituent Circassia Pharmaceuticals have paid off handsomely. However, seed funding in small companies is a very hit-or-miss business model. Furthermore, investing in these tiny businesses based on academic research requires in-depth knowledge of a vast array of healthcare and scientific research. It’s a principle at the Motley Fool to invest in companies you understand, and without the scientific background to understand Imperial’s investments, I won’t be following Neil Woodford’s lead and buying shares.

The post Should you follow Neil Woodford and buy BAE Systems plc, Purplebricks Group plc and Imperial Innovations Group plc? appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Major boost

Clearly, recent news regarding payment for oil exports by the Kurdish Regional Government (KRG) has been positive, with a handful of payments having been received in recent months. Furthermore, just this week the KRG announced plans to make regular payments, as well as gradually paying off its creditors over the medium term. As a result, Genel’s share price was given a major boost.

While this is encouraging, Genel continues to be owed £millions for past production and there is no guarantee that this will be received in the near future, due to the volatile nature of the political outlook in Northern Iraq/Kurdistan. Furthermore, Genel also recently reported that production in 2016 will fall significantly due to lower oil prices and, with the combination of geopolitical uncertainty, the prospect of a falling oil price and no guarantee regarding back payments, there appear to be better options elsewhere within the resources space.

Encouraging progress

Similarly, investing in Amur Minerals (LSE: AMUR) also lacks appeal based on the options available elsewhere within the mining sector. Although the company has a very bright long term future and its update from today highlights the progress which is being made, with a number of highly profitable mining stocks trading on low valuations, the risk/reward ratios elsewhere seem to be more enticing.

Of course, Amur Minerals has the potential to deliver strong share price gains over the medium term as it seeks to commence its drilling programme. Today’s update provides details on the equipment being delivered, the planned work programme for the site, and indicates that Amur making encouraging progress. However, it remains some distance off being a profitable business and given the uncertain outlook for the resources sector, more established sector peers could hold greater appeal.

Lacking appeal

Also releasing a positive update today is Imperial Innovations (LSE: IVO), with the investment company stating that it plans to raise £100m through a placing. The funds will be used to enhance its investment plans and to accelerate its growth rate and have been warmly welcomed by the company’s investors, with Imperial Innovations’ share price having risen by around 6% at the time of writing.

Despite this, the company continues to lack appeal. That’s at least partly because it is expected to record a fall in earnings of 65% in the current financial year and with it trading on a forward price to earnings (P/E) ratio of over 108, its valuation does not yet appear to reflect its expected decline in profitability.

The post 3 Stocks I’m Avoiding Despite Positive Updates: Amur Minerals Corporation, Genel Energy PLC And Imperial Innovations Group plc appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

What are the similarities and differences between the options? And which is likely to give you most bang for your buck?

Woodford’s target weighting for his Patient Capital portfolio is: 25% mid/large quoted companies; 25% early-growth companies (typically quoted but may be unquoted); and 50% early-stage companies (quoted and unquoted). Woodford is very much seeking to exploit the same cutting-edge-technologies space that Allied Minds, IP Group and Imperial Innovations invest in, except that he includes mid/large cap exposure.

Woodford anticipates initially holding 50-100 companies; potentially more as the portfolio matures. Imperial, IP and Allied have stakes in 98, 90 and 20 companies, respectively (a combined 208).

Geographically, Woodford is targeting at least 70% invested in companies traded on the London Stock Exchange or incorporated in the UK. An equally-weighted Imperial, IP and Allied portfolio (let’s call it IIPA, for convenience) would have about 67% invested in UK companies, via Imperial and IP, and 33% in the US, via Allied.

So, there are a number of broad similarities between Patient Capital and IIPA, with IIPA’s lack of any large-cap exposure perhaps being the most marked difference. The table below shows the blended IIPA’s top 10 holdings

The IIPA top holdings look a little scary against some of the familiar blue-chip names, such as AstraZeneca, that are likely to feature in Patient Capital’s top 10.

But how has the unconventional IIPA portfolio performed? The table below shows some compound annual growth rate (CAGR) numbers for IP and Imperial. (Allied joined the stock market less than a year ago, so isn’t included.)

Now, what can we expect from Patient Capital. The trust’s investment objective is as follows:

“The Company will aim to deliver a return in excess of 10% per annum over the longer term. (Note: this is a target only and not a profit forecast and there can be no assurance that it will be met.)”

Woodford appears confident of success, though, because Patient Capital is charging no annual management fee. His remuneration will come in the form of performance fees, dependent on him beating the 10% per annum hurdle.

It seems Woodford believes he can do at least as well as that long-term 12% CAGR delivered by IP in the table above — and, what’s more, achieve it with 25% of his portfolio invested in less risky FTSE 100/FTSE 250 companies.

While Woodford is renowned for his blue-chip nous, investing in early-stage/early-growth companies isn’t unfamiliar to him. In fact, he actually holds Allied (4.1%), Imperial (1.3%) and IP (0.8%) in his mainstream Woodford Equity Income Fund.

Significantly, though, he has also put additional cash into a select few of the IIPA investee companies — presumably in the belief that his subset will out-perform the whole; otherwise, why bother? And the same goes for a number of other early-stage/early-growth companies he’s invested in that aren’t in the Allied, Imperial and IP portfolios.

Woodford will have some hard data on his stock-picking performance in this area of the market from past experience, and projections on what he might reasonably hope to achieve when combining this with a 25% weighting of his high-conviction large-cap picks.

As such, on balance, I tend to think that Woodford’s Patient Capital could offer a better risk-reward profile than the alternative IIPA portfolio. Patient Capital’s shares closed at 102p on the first day of dealing (21 April). I’ll note the IIPA prices at the same date — Allied (687.5p), IP (219.1p) and Imperial (490p) — and perhaps revisit the subject in the future.

The post Should You Buy Woodford Patient Capital Trust PLC Or Back Allied Minds PLC, IP Group Plc And Imperial Innovations Group plc? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.