Mark Dampier: His funds might be big but Woodford keeps it personal

The Analyst

This week marked the 25th anniversary of the Invesco Perpetual High Income Fund, one of the most widely held funds in the UK. Performance has been nothing short of superb, so the fund retains a huge following – £1,000 invested at launch would now be worth £7,155, plus £3,616 of income.

All but eight months of those 25 years have been under the stewardship of the renowned Neil Woodford, and to my mind it is his refreshingly long-term philosophy that has brought success. To him, "long term" means 10 to 15 years, not just a few. It's an approach that allows him to look past the short-term noise and visualise the future of a business or even a whole industry.

The most spectacular example was tobacco stocks in the late 1990s. At the time most analysts felt the tobacco sector would face devastating litigation costs. Neil Woodford took a more sanguine view, feeling that these concerns were overplayed and that tobacco companies at least had the advantage of huge barriers to entry – after all, no one else was likely to set up a new tobacco company. The sector soared over the following decade as investors began to appreciate the growing dividends on offer.

Just as important as backing the right sectors is avoiding the disasters. In the late 1990s banks were the largest sector in Neil Woodford's portfolio, but by 2003 he had sold out, avoiding the worst of the sub-prime crisis in 2007-08. Even now he believes they are un-investable.

Perhaps even more famously, Mr Woodford avoided technology stocks during the internet boom in the 1990s. In fact he was castigated for doing so at the time as he underperformed significantly during that period. I remember him uncharacteristically banging his fists on the desk, saying there would be an almighty crash. Eventually he was proved correct. In this way Mr Woodford has been an excellent custodian of investors' capital. He has the courage to back his own conviction and stick with them – and more often than not he has been right.

However, investors' memories are short. One company recently recommended that investors sell Neil Woodford's funds on concerns they have grown too big to manage, and that he lacks the flexibility to move into mid and small caps. I found this rather depressing because it shows little understanding of how Mr Woodford operates. It is true he can't shift significantly into medium-sized and smaller companies running such a large fund – but he has never done so anyway, even when the fund was much smaller. I believe he can continue his long-term, disciplined approach successfully.

Smaller companies are, in fact, a minor part of this. Mr Woodford has 4-5 per cent of his Income and High Income funds invested in unquoted companies, small, early-stage enterprises where he is taking a 15-year view of them becoming much bigger businesses. This "private equity" facet of the fund is little discussed, but it has the potential to add some real value. Indeed Mr Woodford believes one or two of these holdings will start to mature over the next year.

Naturally Mr Woodford's prevailing views always attract interest, and they haven't changed much over the past few years. He feels pessimistic about the UK economy and favours strong companies in control of their own destinies – as opposed to those at the mercy of economic health. He has also felt for some time that there is great opportunity in the pharmaceuticals sector, which he describes as "profoundly undervalued". He has more than 30 per cent in healthcare stocks, a typically punchy position reflecting his level of conviction. Like tobacco in the 1990s, he believes it's a case of enjoying the high level of dividends and patiently waiting for other investors to recognise the potential.

While fund size can undoubtedly affect the investment process, I believe Neil Woodford's style allows him to run very large sums of money successfully. As ever, he has clearly articulated his views, so it is up to the individual investor to decide whether they agree or disagree with his stance – and invest accordingly. I retain a substantial amount of my own portfolio with his funds, and I regard this as a core holding. I am happy to ignore the short-term noise and continue to back one of the most successful UK managers of our time.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial advisor and stockbroker. For more details about the funds included in this column, visit www.hl.co.uk/independent

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Life and Style
life
News
Brad Pitt and Angelina Jolie reportedly married in secret on Saturday
peopleSpokesperson for couple confirms they tied the knot on Saturday after almost a decade together
Life and Style
Chen Mao recovers in BK Hospital, Seoul
health
News
Joan Rivers has reportedly been hospitalised after she stopped breathing during surgery
people81-year-old 'stopped breathing' during vocal chord surgery
PROMOTED VIDEO
Arts and Entertainment
tv
News
i100
Arts and Entertainment
Diana from the Great British Bake Off 2014
tvProducers confirm contestant left because of illness
Arts and Entertainment
Lisa Kudrow, Courtney Cox and Jennifer Anniston reunite for a mini Friends sketch on Jimmy Kimmel Live
tv
Life and Style
fashion

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Client-Side web developer (JQuery, Javascript, UI, JMX, FIX)

    Negotiable: Harrington Starr: Client-Side web developer (JQuery, Javascript, U...

    Structured Finance

    Highly Competitive Salary: Austen Lloyd: CITY - An excellent new instruction w...

    SQL Server Developer

    £500 per day: Harrington Starr: SQL Server Developer SQL, PHP, C#, Real Time,...

    C#.NET Developer

    £600 per day: Harrington Starr: C#.NET Developer C#, Win Forms, WPF, WCF, MVVM...

    Day In a Page

    Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

    The phoney war is over

    Russian troops and armour pour into Ukraine
    Potatoes could be off the menu as crop pests threaten UK

    Potatoes could be off the menu as crop pests threaten UK

    The world’s entire food system is under attack - and Britain is most at risk, according to a new study
    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
    From Mozart to Orson Welles: Creative geniuses who peaked too soon

    Creative geniuses who peaked too soon

    After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
    Caught in the crossfire of a cyber Cold War

    Caught in the crossfire of a cyber Cold War

    Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

    Salomé: A head for seduction

    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
    From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

    British Library celebrates all things Gothic

    Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
    The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

    Is the Hard Rock Café worth fighting for?

    The restaurant chain's owners are currently embroiled in a bitter legal dispute
    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

    In search of Caribbean soul food

    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
    11 best face powders

    11 best face powders

    Sweep away shiny skin with our pick of the best pressed and loose powder bases
    England vs Norway: Roy Hodgson's hands tied by exploding top flight

    Roy Hodgson's hands tied by exploding top flight

    Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
    Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

    Di Maria and Ronaldo: A tale of two Manchester United No 7s

    They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone