Trust buyers split on Woodford Patient Capital

Trust buyers split on Woodford Patient Capital

Trust buyers continuing to back Neil Woodford’s investment process are eyeing Woodford Patient Capital’s share price for an attractive entry point, following its severe decline in the aftermath of the gating of the firm’s Equity Income fund.

However, critics have warned the share price may never recover from the fallout and buyers are “better off betting on a horse”.

Woodford Patient Capital trust’s (WPCT) share price…

Falling knife

Investment director at Canaccord Genuity Wealth Management Patrick Thomas described an investment in WPCT at this stage as “a Hail Mary”, adding that “discount is structural” and that buying into the trust now is “like buying a house and finding out all the floorboards are broken and the electricity does not work when you move in – you will just find more things have gone wrong”.

He said: “It is the metaphorical falling knife. You are better off putting money on a horse. You have a manager whose track record in the unquoted space is questionable at best and you are not buying into a tried and tested process.

Director at equity research boutique Marten & Co James Carthew said the valuations of these unlisted holdings, and the trust’s NAV, are likely to come under pressure as companies held in common by WPCT and Woodford Equity Income are likely to see their valuation fall.

He added Woodford “has been a major supplier of capital to these underlying holdings” and with WPCT already highly geared it would be “extremely reckless for it to gear up anymore”.

Carthew said: “That is going to affect the long term health of a lot of these companies, which is something else to worry about.”

In addition, he noted WPCT is unlikely to bounce back to previous share price highs any time soon with long-time advocates “losing faith”.

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