Neil Woodford, manager of the Invesco Perpetual Income Fund, has sold his entire holding in Tesco due to his concerns about the risks – both macroeconomic and business-specific – that the investment now entails.
Mr Woodford has held Tesco shares in his funds for most of the past 20 years. However, writing in The Telegraph last week, he said that, while he had believed that food retailers such as Tesco would prove more resilient to the problems of the UK consumer than those that were more reliant on discretionary spending, he had placed too much confidence in the business's ability to cope with the economic headwinds.
"Tesco's problems are, in my opinion, not just down to the difficult consumer environment, though. With the benefit of hindsight, it has become clearer to me that some of the company's investment decisions in recent years have not created the value that they should have – or not yet at least."
He said Tesco needs to become a more cash-generative, less capital-intensive business.
The proceeds of his Tesco sale were reinvested in a broad range of existing core holdings, including a very small amount in Wm Morrison, which, like the rest of the sector, sold off in sympathy following Tesco's disappointing trading update.
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