It seems fair to say that Neil Woodford hasn’t yet replicated his previous success at Invesco Perpetual with his new Woodford Patient Capital Trust (LSE: WPCT).
Initial enthusiasm after the launch in April 2015 pushed the shares up, but that soon waned and the price had dropped to an overall 22% loss by Thursday’s close of play. But it’s only been a little over three years, and just last month Mr Woodford was telling us that it’s still too early to judge.
As a committed long-term investor I’m certainly not going to rush to judgment, and an 8% share price rise on Friday morning has made me sit up and take note.
Thursday’s first-half update had revealed an increase in net asset value from 91.33p to 91.94p during the period, putting the shares on a discount to NAV of 11% at the end of the day. Investment trust shares do tend to trade at discounts, but 11% seems a bit much to me, especially as discounts have typically been narrowing over the past decade.
New valuation
That news was eclipsed Friday by the revelation of a new valuation of Industrial Heat, one of Woodford Patient Capital’s holdings, by its appointed Alternative Investment fund manager Link Fund Solutions.
The new assessment has upped the valuation of Industrial Heat by a whopping 357%, which adds 8.02p to the NAV of the trust’s shares now. That takes it up to 99.96p and the market has duly responded.
But even after Friday morning’s rise, we’re still looking at a discount of nearly 12%, and I really am asking myself if that values Woodford Patient Capital too lowly now.
First-half progress
In that first-half report, chairman Susan Searle pointed out that the period had seen some “demonstrable progress, particularly among the top ten holdings, which has been reflected in some higher valuations.” And Mr Woodford himself pointed out that WPCT was set up with the aim being to invest in “great ideas and help to turn those ideas into great businesses.”
My colleague Jack Tang has stressed WPCT’s poor early performance, and it’s certainly true that probably most investment trust shareholders look for a good track record in a portfolio of proven investments with solid long-term potential.
But with WPCT’s stated ambition of getting in early with new prospects, which are often not listed and are not easy for private investors to buy shares of directly, I really don’t think it’s for people looking for safety from a successful past record.
Unlucky start
The companies WPCT invests in will sometimes suffer calamitous failures; that’s just the nature of the kind of innovative businesses that they are. But WPCT has been unfortunate to be hit by a few failures very early on.
Does that suggest Mr Woodford is losing his touch, or is it just the way fortune and statistics happen to work? I fancy it’s the latter, and I reckon WPCT could do nicely over the next decade and more — it does have “patient” in the name, after all.