2 Neil Woodford stocks I'd buy in an instant

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British American Tobacco cigarette making equipment

Neil Woodford is one of the UK's most successful fund managers. Therefore, buying stocks which feature prominently in his fund(s) could be a shrewd move. Clearly, they may not always offer strong performance and there is no guarantee they will beat the FTSE 100. However, in the long run these two Neil Woodford holdings could deliver stunning total returns.

A turnaround opportunity

The last five years have been hugely challenging for AstraZeneca(LSE: AZN). It has been forced to come to terms with the loss of patents on several key, blockbuster drugs. This has caused its bottom line to come under severe pressure. However, its share price has still managed to outperform the FTSE 100 by around 45%. Looking ahead, more outperformance could be on the cards.

The key reason for this is an improving pipeline of new drugs. AstraZeneca has invested heavily in acquisitions in recent years and this has provided it with a much brighter outlook. Its strong cash flow and modestly leveraged balance sheet also indicate there is more scope for M&A activity in future. Therefore, while it is expected to return to positive profit growth next year, this could be the start of a more successful period for the business.

Alongside its profit growth potential, AstraZeneca remains a strong income play. It currently yields around 4.6% from a dividend which is covered 1.3 times by profit. With inflation set to move higher during the course of 2017, it could become an increasingly popular stock among income investors. When coupled with its defensive characteristics, it could prove to be an ideal share to own over the medium term.

Competitive advantage

While British American Tobacco(LSE: BATS) may be best known for its defensive characteristics as a tobacco company, its acquisition of Reynolds could propel its earnings higher. In fact, it could provide the combined company with a major competitive advantage over sector peers, since the new British American Tobacco may be able to invest to a greater extent in new products. This could be in the form of e-cigarettes or other new, innovative offerings and may help to keep the company's performance ahead of rivals.

Although share prices have risen in recent months following the US election, defensive shares such as British American Tobacco may become increasingly popular in the coming months. The potential uncertainty caused by Brexit and by Trump's presidency may lead investors to seek out relatively reliable and consistent growth companies. With the pricing potential and stable demand on offer within the tobacco sector, it could be a popular place to invest in the short run.

With British American Tobacco forecast to record a rise in earnings of 16% this year and 7% next year, it remains a growth play. Its price-to-earnings (P/E) ratio of 18 may not exactly be cheap, but given its relatively low risk profile and growth potential, it seems to be a price worth paying.

A big mistake?

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Peter Stephens owns shares of AstraZeneca and British American Tobacco. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.