3 reasons why Neil Woodford is a successful investor

Here’s how Neil Woodford has enjoyed relatively consistent investment success

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While Warren Buffett is arguably the most famous investor in the US, in the UK that title probably belongs to Neil Woodford. Both investors have delivered excellent returns over a long period. In Neil Woodford’s case, he has focused on high dividend paying stocks in tobacco and healthcare, while also investing for the long term. Here’s why that strategy has made him a successful investor.

Long term

For any investment to come good, it takes time. Although communications are faster today than they were in previous years, and buying and selling shares can be done within seconds, the reality is that the business world moves at a much slower pace. New ideas and new strategies take time to be decided upon by senior management and then take even more time to filter through the company and have an impact on sales and profitability.

Investors such as Neil Woodford therefore invest for multi-year periods. This means that a company which is perceived as good value for money has time to gradually come good, whether that be because of increasing investor interest or improved financial performance. Investing for the long term also keeps trading costs down, which enhances total returns.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Dividend focus

Neil Woodford is known to favour companies that pay high dividends. This is another reason why he has been successful. Various studies have shown that the majority of investment returns over a long period come from dividends rather than from capital gains. This means that income returns are worth taking very seriously.

As well as providing an income return, dividends also provide guidance as to the financial health of a company. If that company is performing well, and its management has confidence in its outlook, then it is reasonable to assume that dividends will be high. Similarly, a high dividend could mean that a company’s balance sheet and cash flow outlook is positive. This would indicate that the company’s risk profile is lower and may mean that its overall risk/return profile is more appealing.

Sector focus

Neil Woodford has favoured tobacco and healthcare stocks in his investment career. In an interview, he stated that he wished he’d bought even more of them, such has been their stunning returns over the years.

Looking ahead, those very same sectors have the scope to continue their excellent performance. In the case of healthcare, the world faces a rapidly rising population over the long term as well as the effects of an ageing population. This means that demand for healthcare products and services is likely to rise in future – possibly at a faster rate than it has done in the past. Similarly, a rising population means that even though consumers are becoming increasingly health conscious, the number of smokers across the world is likely to rise.

Tobacco and healthcare stocks therefore still have huge appeal. Alongside a focus on dividends and a long term view, investing in them has helped Neil Woodford to become one of the best known and most successful investors around.

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »