Neil Woodford's Patient Capital Trust has been slapped with a "sell" rating by broker Stifel Funds, which warned its share price has leapt ahead of its net asset value (NAV), or the trust's underlying value.
Stifel analyst Iain Scouller said the trust's share price had jumped by 16 per cent since May, but just 4.3 per cent of this is driven by NAV growth, meaning it's trading at a premium of 13 per cent.
Another reason for the hefty premium could be its recent entry into the FTSE All Share and FTSE 250, meaning it's been bought up by tracker funds which follow these indexes, further inflating its share price.
"With the fund having only been launched two months ago, these are extremely early days in the life of the portfolio," Scouller said.
"Normally, in these circumstances, we would wait some time before initiating coverage. However, given the elevated premium and the technical index factor, which appears to have created demand for the shares, we think it is worth highlighting the expensive nature of the shares to investors at this early stage."
The Woodford Patient Capital Trust invests in early stage and early growth companies, along with a mix of blue chip stocks.
The trust raised £800m in a initial public offering in April, with the offer was oversubscribed by 10 per cent, and four times the £200m initially targeted.