In a shock development, under-fire portfolio manager Neil Woodford announced yesterday share trading in his flagship Equity Income fund has been suspended. Clearly, this is bad news for investors in the fund because it means they cant currently access their money.
However, its not just Woodford investors that will be impacted by this suspension, as its likely to have implications for a number of popular FTSE 100 stocks. Heres a look at three stocks that could be affected.
Hargreaves Lansdown
Online broker Hargreaves Lansdown (LSE: HL) is one company that could certainly be impacted by the suspension. Thats because, despite the funds shocking recent performance, the broker continued to include it in its Wealth 50 list of top fund recommendations.
This raises questions over conflicts of interest and the quality of Hargreaves advice. As Gavin Lumsden, editor-in-chief at Citywire said: While Hargreaves Lansdowns reputation for service is undimmed, the credibility of its investment guidance and stewardship of customers is damaged.
Today, Hargreaves has dropped the fund from its Wealth 50 list. However, the stock is down more than 4% on news of the suspension, and I wouldnt be surprised if the shares fall further in the short term while the issue remains in the headlines. From a long-term view, however, I remain bullish on Hargreaves shares and, in my opinion, any short-term weakness could be a buying opportunity.
St. Jamess Place
In a similar position is wealth manager St. Jamess Place (LSE: STJ), for whom Woodford manages around 3.5bn. Its shares have also taken a hit today. While many other wealth managers have abandoned Woodford in the recent past due to his poor performance, St. Jamess Place has continued to back the portfolio manager.
Indeed just last week, St. Jamess Places chief investment officer Chris Ralph told the Financial Times while the group was closely monitoring the fund managers performance amid withdrawals from investors, it remained confident in Neil Woodford and his ability to manage our clients money as mandated.
And the company later issued a statement saying it had no plans to change Woodfords mandate. This faith in the struggling portfolio manager may hurt the group in the short term although, like Hargreaves, I continue to see long-term appeal in the shares.
Imperial Brands
Finally, the suspension could actually be good news for tobacco giant Imperial Brands (LSE: IMB). Imperials share price has taken a big hit in the last year, and this may be partly related to Woodfords selling activity.
This time last year, Woodfords Equity Income fund was worth around 7bn and Imperial Brands was a top holding at around 7-8% of the fund. This means Woodford had over 500m invested in the tobacco company. Now, however, the fund is worth around 3.7bn and the weighting in Imperial is only around 3%, which equates to a holding worth a little over 100m. This suggests to me Woodford has had to dump a large number of Imperial shares to meet clients redemptions and this wont have helped IMBs share price.
Interestingly, Imperial is up over 2% today. With Woodford no longer forced to sell the stock, perhaps the tide is about to turn for the out-of-favour tobacco giant?
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