I look back over my investing choices at the end of each year and see what I can learn. But I like to see what my favourite experts, Warren Buffett of Berkshire Hathaway fame and the UK’s own Neil Woodford, the founder of Woodford Investment Management, have been up to too. Why? Because I can learn more from them than from myself.
When I looked in 2015, Woodford’s Invesco Perpetual Income Fund and Perpetual High Income Fund were up around 180% over 10 years, while Berkshire Hathaway had gained 150%. Those are cracking performances, with Woodford ahead at the time — but I’d expect the advantage to swing either way in different periods.
What have they been up to this year?
Since the EU referendum, Neil Woodford been reducing his holdings in some big FTSE 100 companies. He’s pulled out of consumer goods giant Reckitt Benckiser and those stalwart income providers SSE and Centrica.
But Reckitt Benckiser shares had soared in the immediate aftermath of the Brexit vote, and even though they’ve fallen back a little since, we’re still looking at forward P/E multiples of more than 20 with low dividends yields. A safe stock for sure, but not one that’s likely to outperform in the next few years, and I’m not surprised to see it dumped.
I’m more surprised about the dropping of the utilities firms as they’re offering big dividends, but perhaps he doesn’t see them as so solid these days?
Where has the cash gone? Much of it into smaller firms, so we might be set for a small-cap resurgence.
They don’t like banks
The two investing gurus agreed about one thing, both showing their distaste for banks. Buffett said earlier in the year that he wouldn’t dream of touching around 90% of the world’s banking shares.
But he still loves Wells Fargo, which grew to become Berkshire Hathaway’s second biggest holding, and he looks set to continue to increase his stake even though Brexit-spooked investors have been dumping it and pushing the price down. But he didn’t get where he is today by going with the crowds.
For his part, Woodford ditched HSBC Holdings this year with uncertainty over the size of fines for the sector’s misbehaviour counting as a big fear.
Buffett has also been buying into Apple this year, despite his historical aversion to technology — but that probably says more about Apple these days and its increasing strength as a lifestyle brand. Berkshire took its stake in Apple to around $1.5bn in 2016.
And talking of technology, Berkshire also upped its stake in TV and communications giant Liberty Global during 2016, giving it a stake of more than $500m. And the firm has been building its stake in US airlines too of late, while UK airlines shares have been decidedly wobbly after the Brexit decision.
Sticking with favourites
Despite quite a bit of selling, Woodford has stuck with his big favourites with AstraZeneca and GlaxoSmithkline still up there, along with Imperial Brands.
The striking difference between the two experts this year, for me, has been Woodford’s move to potentially higher-risk smaller caps — he’s bought into Purplebricks and also likes smaller pharmaceuticals businesses. Buffett, meanwhile, seems to be sticking to his famous buy and hold forever strategy.