Woodford: This is a once in a decade investment opportunity
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Invesco Perpetual income guru Neil Woodford says the pharmaceutical sector represents one of the best investment opportunities in his career.
In an interview with Money Marketing at the Fund Strategy Investment Summit in Austria, Woodford said the sector, which accounts for around 25 per cent of his £7.9bn income and £10bn high-income funds, represents a similar opportunity to tobacco 25 years ago. He is likely to raise his exposure beyond 30 per cent after increasing it from 22 per cent at the start of the year.
Woodford said markets currently offer the best investment opportunities since the tech bubble in 2000. He said: “The Neil Woodford frustration index is on red and that has only happened twice before. The first time was in the lead-up to our eviction from the ERM in 1992, when we had an unsustainable monetary policy and valuations of anything cyclical were unbelievably low.
“The second time was the tech bubble and the disparate valuations between old and new economy. We are close to that degree of disparity now.”
He said there are massive opportunities in pharmaceuticals as the market has misread its fundamentals. He said: “From time to time, stockmarkets get swept up by momentum that has nothing to do with fundamental valuations, which in the long run is the only thing that really matters.”
Woodford said AstraZeneca is a good example of this, highlighting an analysis that investors will get their money back over 10 years and still hold the firm while AstraZeneca will spend $50bn on research and development. He said: “Analysts are assuming you will spend $50bn in 10 years on the pipeline and get nothing back. I have never seen valuations like this. Pharmaceuticals is a very strong and powerful industry that is being given away by the stockmarket at the moment. I do not think the market will ignore valuations for very much longer.”
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