The sale of stock by Neil Woodford's stable of funds is creating opportunities to buy interesting companies at depressed valuations, according to James Henderson, manager of Henderson Opportunities Trust (HOT).
The suspended LF Woodford Equity Income fund (WEIF) has been forced to sell much of the less liquid part of its portfolio and recycle the proceeds into FTSE 350 stocks so it can meet investor redemptions once it re-opens.
Elsewhere, Richard Colwell and Nick Purves have been repositioning St James's Place's UK equity funds by selling off similar stocks and Ben Whitmore is acting similarly with his Omnis Income Growth fund - Woodford lost both mandates shortly after WEIF was gated.
All three funds have sold hundreds of millions of pounds worth of stock each and, as a result, Henderson told Investment Week he has been "getting slightly bombarded with stock [because] there were four or five pots of it".
While Henderson stressed Woodford's sale was "not a reason to build a holding; the fundamentals [of the business] still have to be right", it has provided "the perfect storm" and presented opportunities to selectively buy stocks already on his watch list.
One of those was haulage company Eddie Stobart Logistics (ESL), which had also seen its valuation sold down on fears ports would grind to a halt if the UK left the EU without a deal on 31 October.
Henderson said the stock was yielding over 10% and trading on a price-to-earnings multiple of 5x to 6x times when HOT began buying.
But Henderson said ESL "has always been a very good logistics company". The fact its trucks are self-branded, according to the manager, means it can transport goods in them from multiple companies, compared to rivals that allow other companies to brand its trucks.
Therefore, they "have always been able to fill their trucks better than other people" and "they've always operated on a higher margin than [peers]". "They've often achieved 3% to 4% margins when most logistics companies have achieved half that," explained Henderson.
Woodford Investment Management took its stake in ESL to 22.89% from 25%, in early July, raising around £5.8m by selling eight million shares at 73p.
Another company Henderson has recently bought that was sold by Woodford is Redde, an accident management specialist. Woodford sold 25 millon shares at 105p, raising proceeds of £26m and reducing his stake significantly to 19.86%, from 28% previously.