I should Coco
It was perhaps only inevitable that after a summer of disasters in which even Coco The Clown would have struggled to perform as badly as a fund manager, we received a belated apology from star fund manager Neil Woodford. In fact, The Telegraph has already downgraded Woodford to Britain’s “best known” fund manager. Ouch. But of course, you did not have to be a star fund manager to see the debacle of AA, Provident Financial and AstraZeneca panning out. The Woodford mania of recent years really had nowhere to go but down. The overexpansion of the eponymous fund(s) mixed in well with the slick marketing shots and holier than thou pronouncements on both companies and the markets as a whole really had to end in tears. A mixture of hubris and karma tends to do for even the best of us, and while one has to acknowledge the man’s talent, most of us would prefer not to have what he has if we could avoid the likes of Provident Financial before a profits warning.
The Luck Factor
But perhaps the real issue here is whether the recent woes of Mr Woodford were somehow bad luck or bad judgement? The verdict on this could very well determine whether his £17bn under management is the high tide of his career, or we are looking at a blip? The answer to all of this depends on how deep you wish to go into the possible thought processes involved in buying stocks. For instance, even with my scant medical knowledge, I know that lung cancer is one of the most difficult cancers to treat. While there would admittedly be a massive upside for a successful treatment, one would not wish to bet the farm or even part of it on anyone trying to formulate a cure. This summer AstraZeneca came to a cropper, and hence, in turn, did Neil Woodford. The odds were simply stacked against both parties, and this was the case two months ago, two years ago, and will be so even in two years time.
Similarly, after nearly a decade of near zero interest rates, but with wages falling in real terms, how much of a ride was still left in doorstep lender Provident Financial? Indeed, the problem in both of these examples is that you can see where the fund manager was coming from, a big drug win, and an easy momentum play at Provident. It could be said that we have an example of incomplete rigour. One could go so far as to say, if there was any serious investment committee in place at Woodford Towers, it beggars belief that someone did not suggest that there were or are better risk / reward situations around.
Speaking of risk/reward we come to the latest Woodford investment in crowdfunding outfit
Sowing The Seeds
Seedrs. He previously backed the group in 2015, and is adding £4m which is apparently a record single investment in the space. Unfortunately, it is difficult not to come to the conclusion that this deal is Provident Financial Mk II. The crowdfunding space is again a wrong side of the odds bet, beset with quality and quantity issues in terms of the players in the sector, as well as the companies offers on the respective platforms. I would venture to suggest that after all these years if Seedrs needs a £4m investment to accelerate growth, there is not likely to be much growth to accelerate. We shall see whether the curse of Woodford strikes again?