ITV was one of two new holdings introduced to the Woodford Income Focus Fund in September and marks yet another contrarian play by the eponymous manager in a world where traditional media is under threat.
He also took part in the IPO of Warehouse Reit, an investment trust investing in UK warehouses in urban areas, funding both purchases by selling positions in AbbVie and Gilead.
Explaining the decision to buy the media firm, head of communications Mitchell Fraser-Jones said ITV was a “highly cash generative business” with a strong record of returns for shareholders.
“Its valuation has started to look increasingly attractive recently, however, as the market has focused on the perceived structural threat posed to the business by digital media,” he said.
“We are not complacent about the way that global advertising trends are evolving but, in our view, the risks are now more than adequately reflected in the share price. These worries, coupled with the company’s UK focus, have therefore created an attractive entry point.”
Woodford performance returns
The fund delivered a positive return over the month despite slight declines in the UK stock market.
The news is sure to settle Woodford after a tough year which saw him apologise publicly for the recent underperformance of his Equity Income Fund and early-backer Jupiter Merlin pull out two-thirds, £300m ($395.5m, €336m), of its position in it.
Woodford favourite, Astrazeneca, was one of the main drivers of performance after bouncing back from the failure of the Mystic II drug trial earlier this year, the firm said in its September update.
Retailer Next also boosted returns for the fund after reporting better-than-expected interim results. Shares are expected to yield more than 5%.
Dragging performance down was both Capita and Card Factory which struggled in September, but Woodford is said to be confident in the prospects and even added to his position in the latter, the update said.
Fraser-Jones said September brought a “slight reversal in the trends” that had been a headwind for the fund’s performance.
“This is an encouraging development, and although there are sound reasons to believe this could become more established in the months ahead, it is too early to conclude that a more meaningful reassessment of the fundamental outlook for markets is now underway,” he added.
The Income Focus fund launched in March this year, the third fund opened under the Woodford brand since he left Invesco Perpetual in 2014.
