I have no intention of boring the readers of this blog about my thoughts on the Neil Woodford affair – I’d simply refer you to my recent Citywire column on the subject, HERE.

Now, just to prove that I can be contrarian, I am beginning to think that the well-deserved kicking of the Great Neil is overdone. Put simply he’s made a series of mistakes and he’s now paying the price. But that doesn’t mean that all his investments are a crock.  I happen to think – pace my Citywire article – they were in effect oversold to a gullible retail audience that believes all that active stock picking bull**** but even I think that Neil has made some smart choices in the past. I also happen to think that investing in early stage, illiquid stuff can be a brilliant strategy if you are patient and willing to live with the illiquidity. So, whilst never wanting to be seen as anything other than critical of the Great Neil, I do find myself wondering if we’ll all end up overdosing on the recriminations.

In particular, I have a suspicion that sooner or later we’ll collectively oversell Patient Capital Trust. Which brings me to my one positive Neil Woodford story. I have invested in Patient Capital in the past, namely at launch. HL was shouting so loudly about it – strange, HL liking an investment trust…- that I thought it would be overbid. I subscribed at 100p and then sold at 115p. As I sold it I remember thinking that this was actually a glorified VCT that deserved to sell at a small discount.

Anyway, flash forward many years and Patient Capital is now in trouble. My guess is that many wealth managers who bought the stock for their clients will now start forming an orderly line and sell the shares. They’ll bide their time and they’ll keep selling, hoping for some suckers’ rallies. In the table below I have listed the top ten holdings in the fund. As I said, its basically a venture capital fund. But I also think there might be some absolute corkers in there – I rate Oxford Nanopore, Immunocore, and Oxford Sciences. I have my doubts about Atom Bank but from memory, I also think Ratesetter might be a decent holding, and the latter is a quality outfit.

So, at what price would I start to buy in? My back of fag paper estimate is that we really need to see a 40 to 50% discount on this fund before the value hunters can come out to play. As the last Nav was 86p from memory that implies we need to get to around 43p to 50p. So with the shares kicking around at 55p, I think we have some further to go. And I think that long tail of wealth managers eager to quietly sell and remove from displayed portfolios will provide that thrashing. But at 45p/50p I might start nibbling and buy a few shares on a contrarian bet that somewhere in that portfolio are some potential world beaters.

Morgan Stanley on investor sentiment – surprisingly bullish

Interested to hear that Morgan Stanley ran their regular Global Investment Seminar last week. It included 41 of their senior clients and a note out today from Graham Secker’s team sums up the prevailing sentiment. The bottom line?

This bunch was a lot more positive than most – I’ve highlighted in bold what I think are the most interesting takeaways.

Banks as a contrarian play.

Europe is out of the dog house, and maybe its time to look again at value stocks?

• Moderately bullish equities for next 12m. There is a slight negative skew to investors current risk positioning, however thereafter investors appear quite optimistic with 46% expecting global stocks to return more than 5% over the next 12m versus 22% who see a fall of 5% or more.
• Europe set to surprise on the upside? Last year our audience rightly predicted that the US would enjoy the best subsequent equity returns and have the greatest chance of an upside economic surprise. This year Europe wins on both counts with 43% expecting the region to be the best performer over the next 12m.
• Little sector conviction. There was little conviction on which area of the market would likely be the best performer over the next 12m with Cyclicals, Technology and Defensives all polling close to 30%. There was much more conviction in terms of not wanting to own Commodities or Financials.
• Investors have ‘given up’ on Financials. Reinforcing this loss of heart on Financials we polled investors on their view on European Banks in particular; 37% thought they were a structural sell and 40% had no interest in the sector given high uncertainty levels.
• Hope for Value. Only 13% thought Value Investing was structurally challenged while the same percentage saw the current situation as a once-in-a-lifetime opportunity to buy Value stocks. 50% think now is a good time to selectively buy some Value stocks and sell some Quality names