Master investor Neil Woodford has been busy putting his clients money to work since the launch of his new CF Woodford Equity Income Fund in June.
September saw further trading. In particular, the fund increased its holdings in British American Tobacco (LSE: BATS),NEXT (LSE: NXT) and G4S (LSE: GFS), and exited its position inReckitt Benckiser (LSE: RB).
British American Tobacco
In one of Woodfords perennial favourite sectors, the fund added to its stake in British American Tobacco on undeserved share price weakness. There was no trading news from the company during September, but the shares fell from north of 36 mid-month to barely above 35 by the end.
You can actually buy at 34.50 at the minute; so cheaper than Woodford paid. At that price youre getting British American Tobacco at a forward P/E of 16 with a dividend yield of over 4%.
Security firm G4S is another company that released no trading news during September, and was added to on the basis of undeserved share price weakness. G4S suffered a very poor 2013, and remains out of favour with many analysts, but Woodford is nothing if not a contrarian.
You can still by the shares today at the level to which theyd fallen in the latter part of September: around 2.50. The forward P/E in G4Ss case is pushing 18, so higher than British American Tobaccos, while the dividend yield is lower at below 4%.
Retailer NEXT did have trading news during September; and it wasnt good. The company warned that if the unseasonably warm weather continued throughout October, it was unlikely to meet its full-year profit guidance.
The Woodford teams response? As long-term investors we are not deterred by this weather-related blip and took the opportunity to add to our holding in what we continue to view as a very high quality, dependable retail business with an outstanding track record of delivering long-term shareholder value.
At a share price of 66.50, NEXT is on a similar P/E and yield rating to British American Tobacco.
Consumer goods group Reckitt Benckiser is a company Woodford had held in his portfolios for over a decade. The company had delivered exceptional returns, but Woodford and his team are not sentimental: We continue to view Reckitts as a great business with a very strong management team and an excellent product line-up. Such a high quality business deserves a high market rating but the shares have recently become too expensive to continue to justify their position in the portfolio.
Reckitts shares traded above 53 for much of September, peaking at just shy of 55. You can buy today at 52, but the P/E is still high at 20 and the yield is below 3%.
Woodford is best known for his blue-chip investments, but he also recognises that smaller companies offer bigger potential gains.
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