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Woodford Patient....
King Lodos
Posted: 25 November 2017 04:44:50(UTC)

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colin overton;53628 wrote:
I made a comment that we need to see some growth from Woodford's Patient Capital trust before anybody's likely to put any more money in it. Don't know if it was published? I rather like the idea of Old Neil giving up on this trust and selling out, giving us back another 9p above the share price to defrayal losses. It would also get Old Neil out of a difficult corner. I have a feeling that this trust is going to see very bad times before things improve.


For me, HVPE is the only Private Equity/Venture solution anyone needs, and I'm a long way from recommending WPCT.

But I still think your commentary really just communicates that some investors should steer clear of specialist funds.

The real story of WPCT (assuming Neil's not suddenly become hapless after 30 years) is this .. WPCT launched at the peak of a huge bull market in Biotech:

https://40e4h71x6oct2l54xn1hortg-wpengine.netdna-ssl.com/wp-content/uploads/sites/7/2017/06/6-27-17-fig-1.png

WPCT's NAV's done no worse than AXA Framlington Biotech since launch, despite being in much earlier-stage companies (mitigating some of the sector falls by diversifying outside it).

But sectors are such huge drivers of returns because when money's coming in, it lifts all the boats together – M&A activity, IPOs, institutional investment, etc. It was early stage Biotech that drove Woodford Eq Income to the top of the sector after launch – and all that's happened since both funds trailed off is in that chart.

The question is when Biotech starts lifting off again .. It could be now, could be 10 years time .. You don't invest in these kind of companies on any less a time scale (real private equity investment often ties your capital up for 15+ years)
3 users thanked King Lodos for this post.
Sara G on 25/11/2017(UTC), Tim D on 25/11/2017(UTC), Guest on 25/11/2017(UTC)
colin overton
Posted: 25 November 2017 09:00:28(UTC)

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Great King, I hadn't realised that this trust was supposed to be a bio and Pharma one? I must have missed that in the original launch document? To say that this trust has done none worse than a badly performing bio and Pharma UT is irrelevant. If Woodford wants to operate a trust for small bio and Pharma companies he should launch one. He's over reliance on Prothena is also silly and dangerous. At a time when the AIM and Small Cap indices are up 80 and 60% respectively since this trust launched, to pick stocks that are now, on the share price, almost 20% down is very poor performance. I am surprised you defend Woodford in this regard.
I am disappointed and angry that I have ended up with a trust that was not as described and is being technically poorly run. Also what happened to the idea of initially investing in large companies until enough good small companies became available? I thought Woodford's reputation was built on owning large companies that produced good dividends?
Micawber
Posted: 25 November 2017 09:15:51(UTC)

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WPCT is just 34% healthcare.

If we look for factors which might have contributed to the marked falloff in Woodford's performance over the past two years especially in WPCT:
- he left Invesco-Perpetual following constraints in the discipline followed by I-P and which he reportedly found irksome: he thought he could do better unconstrained.
- the pool of colleagues in adjacent offices with whom he could kick around ideas has shrunk considerably
- he has made some wrong macro calls, of which perhaps the most egregious was his insistence against 90% of the market two years ago that the Fed would not increase interest rates. The jury's out on another macro call, that the UK economy will benefit from Brexit, but it's out of step with the bulk of the market opinion which has moved money the other way.
- in the case of WPCT, the discount/premium has been far too high for an IT of this risky nature (because of Woodford's starry reputation)
- his initial plan to invest the capital raised in large caps while waiting 'patiently' for opportunities in early stage companies to arise was very soon abandoned
- he went again very soon for another large capital raise, making the then £800m (IIRC) an unwieldy size for what should be an agile trust dealing in tiny companies
- he invested the lot at one time, pretty much, saying that he'd found 'so many' great opportunities

One has to wonder whether over-confidence of a feted 'star manager' in later life may be a factor; and also a desire for national recognition by government and society as a champion of 'patient capital' which might put him in the frame for honours? Or are these unjust musings?

Be that as it may, there's no reason I can see to remain patiently invested in a risky IT which has seriously underperformed the micro UK companies sector and is still not discounted enough, against the day when it possibly does better. I'll be happy to join investors when WPCT starts showing some convincing legs, and meanwhile my money is doing nicely elsewhere.
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King Lodos
Posted: 25 November 2017 10:06:25(UTC)

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You can add up the portfolio holdings here:
https://woodfordfunds.com/funds/wpct/portfolio/

It's almost 70% Healthcare, while much of the Technology and even Financials (e.g. Arix Bioscience) are Biotech.

"I hadn't realised that this trust was supposed to be a bio and Pharma one? I must have missed that in the original launch document?"

I don't know how anyone could've missed it – I did only the most basic research before investing, and knew full well what it was investing in (and that quite a few were based on Woodford's business park in Oxford).

Micawber, very surprised at you .. Maybe you hadn't taken much interest, but how could anyone not know this was an early-stage biotech trust?

https://media.licdn.com/mpr/mpr/shrinknp_800_800/AAEAAQAAAAAAAAgvAAAAJGRkODljODA3LWQ2MjEtNGU1Mi1iMzkwLTYzNzc3Njg0MzQ2NA.jpg

From an article titled "Biotech Investment Trusts: A Shored Up Long Term Investment"

https://www.linkedin.com/pulse/biotech-investment-trusts-shored-up-long-term-richard-bolton

It's the sector .. Whether they're good companies or not is another matter, but when the sector's still way down on 2015, WPCT's performed exactly as expected .. The problems Neil's faced with these holdings are par for course – that's why you diversify .. But when the sector's doing better, you have enough winners to hopefully compensate those
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Tim D on 25/11/2017(UTC)
Big boy
Posted: 25 November 2017 11:02:28(UTC)

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History shows that investors go for the story at the wrong time. They tend only to invest on the crest of a wave which is backed up by press (easy story that everyone believes) and Managers who wish to make loads of money. How much would WPC raise if launched to -day?....the story hasn't changed.
I would cut them and use the benefit of the CGT loss. (Recoup some of capital loss). I will be patient and only buy when investors have lost their patients......should then be on discount of 25-30%. Over past decades its normal to buy into sector on these discounts. Be careful of unquoteds as they will fall sharply as the IPO market dries up (signs showing now) and we move into a bear market. This is why you will be able to buy Private Equity on large discounts.

Don't forget the "cherry pickers" out there who will lose patients and so depress the prices of WPCs stocks.
Build it up and then knock it down when you don't like it.

Looks like coffee time....A&P coffee is great and very good price so need to buy more on Monday morning.
2 users thanked Big boy for this post.
Sara G on 25/11/2017(UTC), Tim D on 25/11/2017(UTC)
Micawber
Posted: 25 November 2017 11:44:40(UTC)

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Micawber;53648 wrote:
WPCT is just 34% healthcare.
.


The figure was taken from a quick look at Hargreaves Lansdown's 'at a glance'. Maybe you should message them!

I hadn't realised Purplebricks (in your list) is really a biotech company.... I thought IDEX was a biometrics (security tech) company....

Running WPCT against BIOG is interesting.
Sara G
Posted: 25 November 2017 12:03:05(UTC)

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I don't think Neil has permanently lost it but do agree that the move from IP removed a constraint that, while unwelcome from his perspective, was helpful in terms of discipline. As far as I can tell he is now surrounded by younger, less experienced colleagues who may not challenge him sufficiently.

When I bought at launch I think it was always clear that there would be a heavy focus on health and biotech, and that is the role it played in my pf, although it was also clear that Patient Capital was the overriding theme and that this would include other sectors. What was less clear perhaps was quite how concentrated a bet Prothena might become (in the short term at least).

I think Neil will get his act together - his passion for the fund is clear and I don't think it has anything to do with becoming 'Sir Neil'... Of course that passion can lead to trouble if it leads to blind faith in a company he strongly believes in.

As regards the current war with Kerrisdale, I don't know which of them is right - and in some ways it doesn't matter. As a small investor it was a case of getting out of the way while they fight it out. If the discount does fall to 30% Kerrisdale may well be picking up the spoils.
colin overton
Posted: 25 November 2017 12:03:27(UTC)

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Whatever the Bio and Pharma percent of old Neil's Trust is now I think it's more than 34%, with or without Healthcare. While it's true that the fund has ended up by being dominated by bio and Pharma, again I repeat, I thought this was a general small cap investment opportunity and I believe it was originally described as such by old Neil. As for initially spending 20% of the 850 million pounds on Prothena, it was initially reckless and now looks close to a disaster. There are other companies in the top 10 of this fund with about 10% of the funding them. The last report I read from the fund said they were 245 investments. So we have the strange situation that there are too many investments in the trust to track properly and yet the trust has decided to concentrate it's money in a few small companies. This is a strange way to run any mutual. The fact is it hasn't worked, some of Old Neil stock picking has been, let's be kind and say poor. I am surprised that any experienced investor thinks that this trust is ever going to climb to, let alone beat standard benchmark indices
King Lodos
Posted: 25 November 2017 13:07:30(UTC)

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Micawber;53651 wrote:
Micawber;53648 wrote:
WPCT is just 34% healthcare.
.


The figure was taken from a quick look at Hargreaves Lansdown's 'at a glance'. Maybe you should message them!

I hadn't realised Purplebricks (in your list) is really a biotech company.... I thought IDEX was a biometrics (security tech) company....

Running WPCT against BIOG is interesting.


Morningstar's got the number closer, at 64.9 .. but even then you have to look at what's getting labelled 'financials' and 'technology'.

He's got the flexibility to invest anywhere – but if you're not into early stage Biotech, it's not the fund to invest in
chubby bunny
Posted: 25 November 2017 13:15:02(UTC)

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From the 2015 prospectus:

The Company will invest in:

mid and large-capitalisation listed, mature companies; Early-Growth Companies, which are typically quoted although may be unquoted companies; and Early-Stage Companies, which are likely to include both quoted and unquoted companies.

Initially, the Company is expected to have a portfolio that is dominated by mid and large-capitalisation listed, mature companies that offer growth opportunities. It may also have an allocation to cash, pending investment in Early-Stage Companies and Early-Growth Companies.

Over time, the exposure to Early-Stage Companies and Early-Growth Companies is expected to gradually build. This process is anticipated to take one to two years from Admission. In due course, the Company’s portfolio is expected to reflect the following breakdown:

approximately 25 per cent. invested in mid and large-capitalisation listed, mature companies;
approximately 25 per cent. invested in Early-Growth Companies; and approximately 50 per cent. invested in Early-Stage Companies
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Tim D on 25/11/2017(UTC)
chubby bunny
Posted: 25 November 2017 13:32:54(UTC)

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colin overton;53654 wrote:
I thought this was a general small cap investment opportunity and I believe it was originally described as such by old Neil. As for initially spending 20% of the 850 million pounds on Prothena, it was initially reckless and now looks close to a disaster. There are other companies in the top 10 of this fund with about 10% of the funding them. The last report I read from the fund said they were 245 investments.


I always saw it as a micro/nano/unquoted trust. He didn't spend 20% on Prothena. It has a total of 80 holdings.

Much easier to find accurate portfolio information on Woodford's own website rather than HL etc. - https://woodfordfunds.com/funds/wpct/trust-facts/

5 users thanked chubby bunny for this post.
King Lodos on 25/11/2017(UTC), Tim D on 25/11/2017(UTC), Sara G on 25/11/2017(UTC), Micawber on 25/11/2017(UTC), Jim S on 28/11/2017(UTC)
King Lodos
Posted: 25 November 2017 13:39:22(UTC)

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colin overton;53654 wrote:
Whatever the Bio and Pharma percent of old Neil's Trust is now I think it's more than 34%, with or without Healthcare. While it's true that the fund has ended up by being dominated by bio and Pharma, again I repeat, I thought this was a general small cap investment opportunity and I believe it was originally described as such by old Neil. As for initially spending 20% of the 850 million pounds on Prothena, it was initially reckless and now looks close to a disaster. There are other companies in the top 10 of this fund with about 10% of the funding them. The last report I read from the fund said they were 245 investments. So we have the strange situation that there are too many investments in the trust to track properly and yet the trust has decided to concentrate it's money in a few small companies. This is a strange way to run any mutual. The fact is it hasn't worked, some of Old Neil stock picking has been, let's be kind and say poor. I am surprised that any experienced investor thinks that this trust is ever going to climb to, let alone beat standard benchmark indices


I invested at launch (sold not too long after), and it was always focused on early-stage Biotech (and they'd outlined exactly how they were going to deploy capital from day one).

This is why I keep pulling you up .. 1) It was never a regular small-cap fund – and you're in no position to keep with the "Old Neil"s when you didn't even do the most basic research on where you were putting your money.

2) You don't get higher returns without higher risk .. You can't get annoyed with these companies hitting problems, because that's what early-stage companies do .. To call it "stock picking" is to naively misunderstand the difference between investing in an established company like Games Workshop, and investing in a lab that's experimenting with transdermal nutrient delivery systems
colin overton
Posted: 25 November 2017 18:42:52(UTC)

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Great King, I recall what chubby bunny has put down as the basic philosophy of this fund. Nowhere is a bias towards bio and pharma mentioned although that's certainly what happened. Also the plan to invest in larger companies seemed to go by the way. And I repeat anybody running a mutual fund that invests almost 20% in one small company is taking phenomenal risks. Interestingly even your figures show that the initial investment in the top four or five companies was less than it is now, that is less concentrated. The fact is the fund is badly down by any reasonable benchmark measure following a period where investing in small companies has been rather benign. Life is too short to keep arguing and I'm sure you will have the last say.
laurence ireson
Posted: 25 November 2017 19:00:18(UTC)

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the clue is in the title stick with woodford he is a genius its bias towards healthcare is long term
King Lodos
Posted: 25 November 2017 19:31:34(UTC)

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As long as you keep writing nonsense.

The cash and large-caps were space-fillers while it was deploying capital .. This was all clearly outlined, and even the early portfolio was about 70% biotech.

"By any reasonable benchmark" .. The NASDAQ biotech index? .. We've already seen it's performed in line with the most relevant benchmark .. 15% in Prothena; 9% in Oxford Nanoport – this is normal for this type of fund .. Smith and Buffett suggest there's little point holding more than 6-8 stocks as a buy-and-hold investor – beyond 8, and you're diversifying away almost anything stock-specific
chubby bunny
Posted: 25 November 2017 19:56:26(UTC)

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Prothena is still up ~25% since WPCT first bought it and 15% on the average book price. Shareholders voted for a maximum position size increase from 15% to 20% at the last AGM.
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colin overton
Posted: 26 November 2017 11:40:57(UTC)

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I saw that Prothena was -18 percent last week, but I'm sure your figures are correct. I hope Kerryisdale is wrong and that Old Neil turns this mutual around to at least to break even, in the relatively near future. Any bets on when that will be?
chubby bunny
Posted: 26 November 2017 12:48:32(UTC)

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He gave an update on Prothena in an article the other day, but didn't specifically address the short attack - https://woodfordfunds.com/words/blog/prothena/

That's where I got the average book price figures from ($40 for WPCT, $35 for WEIF) and judging by the image in that article it looks like WPCT first invested at ~$36.
King Lodos
Posted: 26 November 2017 12:53:50(UTC)

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Neil's performance will most likely turn around when the Biotech sector does .. If WPCT's not in profit by the time the NASDAQ Biotech index surpasses its 2015 high, then you can start questioning Neil's choices.

The real key is you have to know what you're going to do with an investment before you click Buy..

There's no such thing as 'crystallising a loss' – so it's never too late to correct a mistake .. Most importantly you have to go in knowing at what point you'd get out .. Bad investors hang on too long, then sell when things get too painful (meaning they make big losses, and tie capital up for too long) .. Good investors either get out early and move onto the next trade, or buy more, knowing price falls mean higher future returns .. Early stage investing is difficult because you don't know whether you'd want to own more of these companies yet – so the best bet is not to buy unless you're willing to hold, and diversify enough that one dud holding doesn't affect you (this is why I recommend HVPE)
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Alan Selwood
Posted: 26 November 2017 16:52:50(UTC)

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Small companies, especially start-ups, can be vulnerable, so I always like to invest lots of small amounts in the riskier end, but am prepared to put larger amounts in global front-runners.

So if you look at £100,000 (for the sake of rounding) in equities, you might decide initially to have 25 holdings of £4,000 each, but then replace the allocations by £10,000 in each of 7 solid companies with a long and improving track record, and then spread the remaining £30,000 over 30 companies of £1,000 each which might triple or sink without trace within a year or two. Then any that wobble get sold off to salvage what you can, and the ones that are strengthening get the reinvestment of those proceeds.
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