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
News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
Life and Style
tech
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Sport
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
tv
News
i100
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
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

    IT Project manager - Web E-commerce

    £65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits