Rockwood Strategic (RKW)  310p

Gain to date: 65.3%

Shares flagged the merits of Rockwood Strategic (RKW) at 187.5p in November 2023, highlighting the value-focused trust as a way to gain differentiated exposure to a small cap asset class with re-rating scope.

We lauded manager Richard Staveley’s tried-and-tested strategy, which identifies undervalued stocks where the company will benefit from operational, strategic or management changes that can unlock or create value for investors.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

Rockwood Strategic has cemented its position as one of the very best performing UK smaller company trusts and the shares have responded positively post results (18 June) for the year to March 2025.

These revealed NAV total returns of 21%, which compares to the 1.2% average of the AIC’s (Association of Investment Companies) UK Smaller Companies sector. Rather than being generated by M&A as in past reporting periods, the returns were driven by holdings delivering strong operational performance, in many cases instigated by Staveley. ‘This has since been recognised by other investors leading to share price recoveries,’ points out Kepler analyst Ryan Lightfoot-Aminoff. ‘As such, we believe these results demonstrate the repeat potential of Richard’s approach, as whilst M&A can often be sporadic and reliant on external factors, the heavy engagement approach means value can be extracted from holdings in a variety of backdrops.’

One of last year’s best performers was Funding Circle (FCH), aided by the sale of a loss-making division and cost-saving plan which Staveley helped to instigate; he has booked some profits but continues to hold the stock.

WHAT SHOULD INVESTORS DO NOW?

Stick with Rockwood Strategic, whose premium to NAV has allowed the trust to issue shares to help sate investor demand. Staveley insists: ‘A concentrated portfolio, full of incredibly undervalued equities, is now in place, with identifiable catalysts across our investments to unlock, create or realise value for shareholders.’

Among the new holdings seeding returns for holders of Rockwood are outsourcing business Capita (CPI), regional venture capital provider Mercia Asset Management (MERC:AIM) and Kooth (KOO:AIM), a digitally led hybrid service providing mental health services to young people, which Staveley believes has significant growth opportunities in the US and the rest of the World. 

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