Ace investor Neil Woodford was pretty active during January. Catching my eye among his latest dealings are Centrica (LSE: CNA), SSE (LSE: SSE), Smith & Nephew (LSE: SN), Game Digital (LSE: GMD) and Crystal Amber (LSE: CRS).
Unloved utilities
Woodford has viewed the utilities sector as an attractive fishing ground in recent months. During January, he added to his existing holdings in companies in this industry, “as further political interference caused renewed share price weakness in the energy utility sector”.
The CF Woodford Equity Income fund increased its stake in FTSE 100 energy giants Centrica (owner of British Gas) and SSE (owner of brands including SSE, Scottish Hydro and Southern Electric). The companies’ dividends are a big attraction for Woodford: both offer a forward yield of around 5.6%.
Game on
Video games retailer Game Digital is another company that has been out of favour with the market of late. The FTSE 250 firm issued a profit warning in mid-January, citing fierce competition during the Christmas period. Woodford’s team said:
“This was disappointing, but one poor trading update does not undermine what we see as a strong long-term investment case. The shares fell immediately and sharply after the warning and we took advantage of this by materially adding to our holding at what we believe to be very attractive valuation levels”.
Analyst estimates put Game on a current-year P/E of 15, falling to 12 next year with strong earnings growth forecast.
Amber gambler
Woodford has also revealed that he opened a new position in activist investor Crystal Amber during January (a company he’d previously been invested in at Invesco Perpetual).
Crystal Amber aims to deliver long-term value for its shareholders through active engagement with the companies in which invests, and Woodford fund spokesman Stephen Lamacraft tells us: “We hold its management team in very high regard”.
Crystal Amber is invested in a number of mainly smaller-cap listed companies, but came to wider attention before Christmas when rumours circulated that it was in talks with heavy-firepower overseas investors about launching a raid on Sainsbury’s to shake up the supermarket’s management and strategy.
Hip firm replacement
Woodford funded his purchase of Crystal Amber shares, and his January top-ups, partly by selling what had been the CF Woodford Equity Income fund’s fairly substantial holding in medical devices firm Smith & Nephew.
Bid speculation sent Smith & Nephews shares up to an all-time high of 1,200p during January, putting the company on a forward P/E of 21, with a dividend yield of 1.7% — one of the lowest in the FTSE 100.
In exiting Smith & Nephew, Woodford’s team noted: “Clearly, if a bid were to materialise, it could lift the share price higher still but we believe other opportunities now offer greater long-term income potential”.