Invesco Perpetual's Neil Woodford has said he expects profit warnings will come "thick and fast" in the near term after identifying them as a key risk to markets in the current environment.
The head of investment at Invesco Perpetual, who runs £20bn in income strategies, said although there are "valuation opportunities" in equities at present, he struggles to see markets moving out of their narrow range.
"I think the environment at the moment is quite risky. The accumulation of weak economic data and downgrades across the world in terms of GDP is likely to be reflected in downgrades to profits and earnings. There is earnings risk in the market," said Woodford (pictured).
"So stand by for more profit warnings. They are coming thick and fast. There is risk at the moment. The answer for the overall market is that I struggle to see how the market can make much headway, but within the market there is a lot of opportunity."
Woodford, speaking to shareholders in the £974m Edinburgh investment trust at an AGM this morning, added he expects Europe's crisis to deepen, and said the possibility of a euro area breakup remains.
"My view is that the underlying weakness of continental Europe is likely to get worse. The reason it is getting worse is that we have a combination of monetary and fiscal headwinds, which are getting harder, not weaker.
"It is hard to see how the eurozone crisis will be resolved. You have to attach some probability to a eurozone breakup. You also have to attach some probability to a move to more integration. But either way it is likely to be coincident with poor economic performance."
The AGM revealed the trust's NAV return was 15.2% to the year end of March 2012, an outperformance of 13.8% against the FTSE All Share. The trust's dividend also increased by 5.8% over the same period.
Despite the bleak outlook, Woodford said he is still finding opportunities for the funds he runs and his strategy remains unchanged.
"I have said consistently that despite these difficult economic times, there is a population of stocks that can grow consistently through this difficult period. The companies that feature prominently in the portfolio are the businesses that can deliver revenue, cashflow, earnings, and dividend growth consistently in the future," he said.
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