Shares to buy, hold and sell

Neil Woodford is the manager of the Invesco Perpetual Income and High Income funds. He also co-manages Invesco's Distribution and Monthly Income Plus funds. He runs approximately £23 billion across all his portfolios. His largest fund, the £9.5 billion Invesco Perpetual High Income fund, has delivered 39.8% over five years against a UK Equity Income sector average of 15.7%.

Woodford talks to Cherry Reynard about the last shares he bought and sold, and the ones he's holding on to.


"AstraZeneca now makes up just under 10% of my portfolio and as such is one of my highest-conviction positions ever. The problem with analysts is that they focus on the challenges and don't think about the opportunities. Everyone thinks about President Obama's healthcare reforms, patent expiry, or whether generic drugs are going to take them to the cleaners.

"Drug pricing will come under pressure in the US and UK, but if these companies bring genuine therapeutic benefit to the healthcare market, they will get premium pricing and investors will see significant returns. In the meantime, they generate huge amounts of cash and there are significant barriers to entry.

"In the developed world, demographic changes are in AstraZeneca's favour. As the population ages, it will consume more drugs – there's a clear correlation between old age and the consumption of drugs.

"The developing markets were previously closed, but as India and China have hit a certain level of disposable income, suddenly these parts of the world are populated with new consumers of pharmaceuticals. As 'western' diseases such as heart disease and cancer grow in these countries, the patient population is increasing. 

"AstraZeneca and other pharmaceuticals are part of a group of companies that are very well-placed to deal with the lower-growth economic environment. They are incredibly cheap, high quality, dependable shares, sitting on daft valuations, and - to my mind - look like fantastic places to invest."


"Much of the activity in the financial services sector has been described as 'socially useless'. I would agree - much of what happens in the City is of no value to society.

"However, I think fund managers are socially useful and perhaps the most useful thing I do is to allocate capital efficiently. If an economy is going to generate growth, jobs and exports, it has to develop new ideas that are useful for the world.
"With this in mind, we are one of the biggest shareholders in Imperial Innovations. This business sits alongside Imperial College; it owns the rights to the intellectual property the university develops and seeks to commercialise its research.

"Given it is one of the leading technology universities in the world and that Britain has been responsible for developing some cutting-edge technologies, the hope is we will benefit society and our investors.

"Imperial Innovations has grown rapidly and a number of companies have now spun off from the main company. We have invested in four of these as well. The company aims to bring leadership and management to technological ideas from scientists who would otherwise have little experience of the commercial world."


"Our last major exits were from the oil sector - BP and Shell. During my time as a fund manager, more often than not I have not owned these shares. In general, these are big companies that are not very well managed; they are wasteful and haven't generated consistently good returns on the money they have spent finding oil and gas. Returns on investment are low.
"The super majors don't find oil and gas very well - but they are having to look for these resources in increasingly politically or geologically hostile parts of the world, as the easy-to-access oil has either been exploited or taken by the smaller national oil companies. The cost of exploitation has risen consistently.
"From time to time, these companies have done well as the oil price has spiked and they have received windfalls, but they have not generally been high-returning businesses.

"Also, because their shares are such a big index constituent and people feel they have to own them, they have generally traded at fair value. Rarely have I seen them trade cheaply enough to overcome my reservations."

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