I once was chatting to an broadsheet financial journalist who told me that articles on only three topics make up the majority of their online readership - Buffett, Goldman Sachs and Gold. It is perhaps then little surprise that the piece I published on Friday about Warren Buffett's edge (or lack of) inspired a great amount of debate, not only on this site but also around the Web. It's extraordinary that we care so much about Buffett, when the evidence suggests that his best days might be decades behind him. Surely we should spend more time investigating who is or may be the Warren Buffett of today. It's on this note that we should take a closer look at Neil Woodford...
A great fund manager?
For those that don't know Woodford, he's had an esteemed career as a fund manager at Invesco Perpetual. As head of investments Woodford controls something like £20bn of assets there, the majority of which are invested in higher income stocks.
A quick look at his career history confirms that he's got a terrific record. In fact, it's generally believed that Woodford may be the finest fund manager in the country, and the ratings agencies fall over themselves to give him an A* - e.g. Citywire, and Trustnet. To put his performance in perspective, over the last decade he's returned a compounded 11.3% annualised return compared to the comparatively paltry 6.3% that Warren Buffett managed. Woodford has turned £100 into £290 for investors over a decade in a time when Omaha's finest only managed £185.
I've been tracking Woodford for some time, but have been recently reassessing his performance in the light of research from Societe Generale on 'Quality Income' stocks. For readers that are unfamiliar, their research highlights that dividend paying mid/large caps that display both high quality (in terms of their F-Score) and low bankruptcy risk have a tendency to significantly outperform the market.
As an investigation I decided to create a really dirty comparison of Woodford's record versus the different segments of the market that Soc Gen highlight. This is a really horrid comparison as actually the trustnet charts are quoted in GBP whereas the Soc Gen indexes are global and quoted in EUR but I've put this together merely to serve as a visual cue for discussion. We can see clearly that...