UK’s Top Fund Manager: “So Many Lights Flashing Red, I’m Losing Count”

Friday, December 1, 2017
By Paul Martin

by Tyler Durden
Dec 1, 2017

Neil Woodford is the founder of Woodford Investment Management, with $20 billion under management, and was appointed a Commander of the Order of the British Empire (CBE) for services to the economy in the Queen’s 2013 Birthday Honours List. However, he’s not very happy in his latest outlook for equity markets, nor is he happy with the recent performance of his funds, although he’s been in this situation before – ahead of the tech crash in 2000 and the sub-prime crisis in 2008. According to the Financial Times.

Neil Woodford, the UK’s most high-profile fund manager, has said he believes stock markets around the world are in a “bubble” which when it bursts could prove “even bigger and more dangerous” than some of the worst market crashes in history. The founder of Woodford Investment Management, which manages £15bn of assets, warned investors to be wary of “extreme and unsustainable valuations” in an interview with the Financial Times, likening the level of risk to the dotcom bubble of the early 2000s.

“Ten years on from the global financial crisis, we are witnessing the product of the biggest monetary policy experiment in history,” he said. “Investors have forgotten about risk and this is playing out in inflated asset prices and inflated valuations. “Whether it’s bitcoin going through $10,000, European junk bonds yielding less than US Treasuries, historic low levels of volatility or triple-leveraged exchange traded funds attracting gigantic inflows — there are so many lights flashing red that I am losing count.”

Woodford likes to be contrarian: few people believed that Brexit was a buying opportunity, for example. Given his value investing style, it’s not surprising that’s he’s avoiding high-profile momentum driven names and boosting holdings in old economy “bricks and mortar” companies, literally. The FT continues.

He said this (flashing red lights) was why he was staying out of a host of expensive “zeitgeist” stocks, instead buying UK-focused housebuilders, retailers and banks whose share prices are discounting “economic Armageddon for the UK economy” following the Brexit vote. Mr Woodford shunned bank shares before the 2007 financial crisis and stayed out of the tech sector before the dotcom crash. Both hurt the performance of his funds in the short term, but ultimately cemented his reputation as one of the UK’s most revered money managers.“

In the dotcom bubble it was the old economy stocks which became profoundly unloved and undervalued and today in the UK stock market, it is domestically-focused stocks,” he said. “The funds I manage are positioned to exploit this opportunity and I am utterly convinced it will pay off when the bubble bursts — which I believe it inevitably will.”

The Rest…HERE

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