Woodford: How my top ten stock picks fared this year

Invesco Perpetual’s head of investment Neil Woodford said his favoured defensive blue chip names have recently delivered some confident trading updates, despite tough macroeconomic conditions.

Here the head of investment, running the £11bn High Income and £8.7bn Income funds, explains why he is still backing mega-cap stocks in the traditional defensive sectors, and outlines his favoured stocks' strategies for growth in 2012. 

1. Imperial Tobacco

Woodford predicts the tobacco sector is on track for strong earnings growth in 2012. However, he noted Imperial’s shares underperformed in the first quarter of this year.

Imperial CEO Alison Cooper said the firm’s Q3 results reflected “the strength of our total industry portfolio and our ability to use this unique asset to drives sales and profit growth...and reward our shareholders with a very strong 13% dividend increase.”

2. BT

“BT Group pleased investors, keeping its full-year outlook unchanged after a quarterly performance that reinforced its confidence about hitting its targets,” Woodford said.

Chief executive Ian Livingston said he expected the firm to offset economic headwinds by improving efficiency, processes, and customer service, and by investing in the future of the business.

3. Vodafone

Vodafone’s promises to investors were more tangible, Woodford said, as the firm hiked its dividend by 7% to 3.95p and pledged to pay a special dividend of 4p. Vittorio Colao said the group remains mindful of the economic uncertainty, but is confident it can “perform through top line growth, cost efficiency, investment and cash generation.”

4. Tesco

“Food spending traditionally holds up well in time of recession, but with Tesco now accounting for one in every eight pounds spent on any form of retail in the UK, the company might be expected to be vulnerable to a slowdown in consumer spending,” the manager said.

“However, the company’s international strength held it in good stead here – it reported excellent growth in Europe and Asia, as well as encouraging progress in the US.” CEO Philip Clarke said this had supported progress in the first half, despite subdued demand in the UK, especially in non-food categories.

5. AstraZeneca

Woodford said David Brennan, the chief executive of the pharma giant, has highlighted a number of positives for the firm this year, including "strong cash returns, with dividends and net share repurchases well ahead of last year.