Master investor Neil Woodford lost no time putting his clients’ money to work after the launch of his new CF Woodford Equity Income Fund on 19 June. By the end of the month the fund was almost fully invested.
But he’s continued to be busy during July, opening several new positions and adding to some existing holdings. In particular, he told us today that his biggest new holding is Royal Mail (LSE: RMG) and that he’s also upped his stake in GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US).
Royal Mail
Royal Mail’s stock market flotation coincided with Woodford’s announcement last October that he would be leaving asset manager Invesco Perpetual after 25 years to set up on his own.
Royal Mail’s shares, which were offered at 330p in the IPO and soared to over 600p earlier this year, have now fallen back, and are trading at 409p at the time of writing.
Woodford, who has been impressed by Royal Mail’s management team, has taken the opportunity of the recent weakness in the shares to buy into the company for his new fund, saying:
“This is fundamentally a very attractive, cash generative business. It has its challenges, not least the competitive threat in profitable, densely populated areas. But it has its opportunities too, such as slowly working to bring its cost base into line with its competitors”.
An undemanding P/E of 12.5 and a juicy 5% dividend yield are right up Woodford’s street.
GlaxoSmithKline
Old favourite GlaxoSmithKline was already Woodford’s number two holding at over 7% of the fund when he updated investors on his portfolio at the end of June.
Glaxo’s half-year results, released on 23 July, disappointed the market; and the shares, trading at 1,450p at the time of writing, are down some 7% on their pre-results level.
However, Woodford said a long conversation with Glaxo’s chief executive “has allowed us to maintain confidence in the long term investment case, despite this near term setback”.
Although Glaxo missed on turnover and earnings expectations, Woodford was keen to stress a 6% increase in the Q2 dividend, adding:
“Glaxo remains a very cash generative business and it is a very cheap share in our view, with a starting yield of 5.5% and the prospect of modest but sustainable long-term dividend growth”.
