Should you ditch Neil Woodford and buy this top-performing investment trust?
This year has been a particularly challenging one for Neil Woodford. He has come under sharp criticism from a range of investors for his lacklustre performance, with several of his major holdings delivering disappointing share price performance. As such, many investors may be wondering if now is the time to look elsewhere for investment trusts to buy for the long term. Could this top-performing trust be worth buying ahead of Neil Woodford-managed companies?
A difficult year
Over the last year, the Woodford Patient Capital Trust(LSE: WPCT) has underperformed its benchmark, the UK All Companies index, by around 12.8%. Therefore, while it may be 2.7% up on where it was this time last year, it has been a relatively poor year for the trust at a time when a wide range of stocks, funds and indices have enjoyed a major Bull Run.
The key reason for its difficult year has been the underperformance of some of its major holdings. Notably, Provident Financial has recorded a 70%+ share price fall in 2017 following a profit warning. The company's home credit segment has seen sales and collection figures decline, which has meant there has been a change in management at the business. Neil Woodford has stuck by the company, and recently stated that its share price fall has been overdone. While in the long run this may be true, in the short run investor sentiment could easily worsen.
Neil Woodford has also been criticised for the performance of another large holding, AstraZeneca. His decision to sell GlaxoSmithKline and British American Tobacco has also caused some investors to become uncertain about his future performance outlook. Both stocks appear to offer sound forecast growth rates, and therefore some investors have been surprised that they have been sold in favour of other shares.
While the Woodford Patient Capital Trust has disappointed of late, the Troy Income & Growth Trust(LSE: TIGT) has surged 30% higher in the last three years. This means it has outperformed the wider UK Equity Income benchmark by around 7%. And with it trading at a small discount to its net asset value, it could offer good value for money for the long term.
With a dividend yield of 3.3%, the Troy Income & Growth Trust offers an inflation-beating income return. It holds a number of large, UK-listed income shares such as Unilever, Shell and British American Tobacco. Therefore, it could benefit from a further weakening of the pound as Brexit uncertainty builds. It may also be able to offer defensive characteristics due to its geographical diversity on a company level.
While the Troy Income & Growth Trust appears to be worth buying, the Woodford Patient Capital Trust could also have investment potential. Neil Woodford has an excellent reputation which has been built up over a long period. He has not suddenly become a worse investor in the last year, but rather has experienced the same disappointment which ultimately inflicts all investors at some point in their investing careers.
As such, his company continues to have investment appeal for the long run. Indeed, with a discount of 4% to its net asset value, the recent poor performance could be an opportunity to buy, rather than sell.
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Peter Stephens owns shares in Unilever, Shell, British American Tobacco, AstraZeneca and GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended AstraZeneca and Royal Dutch Shell B. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.