Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Rockwood Strategic. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
RKW’s focus on micro-caps with a value mindset offers a differentiated approach, with differentiated performance…
Overview

Manager Richard Staveley takes a value-orientated approach when constructing a portfolio for Rockwood Strategic (RKW). He looks to capitalise on the lack of research at the smallest end of the market cap spectrum in order to profit from the extreme price inefficiencies that exist as a result. He regularly targets companies below £150m market cap as these are often overlooked by other investors from which he has delivered strong Performance.

Richard primarily focusses on turnaround situations where there is scope for material profit and valuation recovery. He creates an exit strategy within the investment case and identifies the required catalysts for change. The strategy typically buys meaningful shareholder stakes, often well in excess of 5%. These provide the basis for constructive engagement where Richard will offer advice to help create value for shareholders, ensure catalysts are recognised, and eventually have a material influence on the outcome of the business. To do this effectively, he maintains a highly concentrated portfolio of c 20 companies split between ‘core’ and ‘springboard’ positions. These are backed with conviction, where the largest positions can be over 10% of the portfolio meaning each can have a significant impact on returns (see Portfolio).

The trust has had an eventful history, though this has now settled, with the manager and strategy in place for a number of years albeit with a short hiatus (see Management). This approach has been supported by the parent group and manager through a considerable shareholding. RKW has also delivered strong returns for shareholders under Richard’s strategy which is primarily due to realised returns from several individual stocks, although raised cash levels in market falls will have had an impact. That being said, RKW is one of the best-performing trusts in the UK smaller companies sector since the manager took over, which may be reflected in the considerable narrowing of the Discount.

Kepler View

In a populous sector, we believe RKW stands out by offering a genuinely differentiated approach, that means it owns a portfolio of companies that are unlikely to be owned elsewhere (see Portfolio). Richard’s focus on the smallest companies in the market, selected with a valuation mindset, means that the factors driving performance are likely to be different to what can be found elsewhere in the peer group, or from an investment in a tracker. As such, we believe RKW could be considered as a complementary holding to balance more quality growth-focussed peers, as well as being attractive in its own right.

Not only has this differentiated approach led to a unique portfolio, but it has led to sector-leading Performance too. This performance hasn’t just been driven by a buy-and-hold approach seen elsewhere, but through constructive engagement by Richard and the experienced team at Rockwood (see Management). There have been higher cash levels though that will have contributed to relative performance in falling markets, but on the whole, we believe the trust is less reliant on market forces to drive returns as the manager can help instigate a performance turnaround, including through M&A activity which can be supported by the flexibility of the wider Harwood group, albeit we understand with strict rules in place. As such, we believe the trust can genuinely provide good performance in a variety of market backdrops. This is supported by the highly concentrated nature of the portfolio, meaning success in just one holding could have a material impact on the returns of the trust.

Bull

  • Strong performance since manager and strategy inception
  • Highly differentiated approach leading to a unique portfolio
  • Both manager and the supporting team are specialists in this market segment

Bear

  • Concentrated, high-conviction portfolio can add risk
  • Micro-cap investments can struggle from liquidity issues
  • The trust charges a performance fee which may not appeal to some investors
Continue to Portfolio

Fund History

04 Mar 2024 Rockwood Strategic
Richard Staveley
Rewatch this webinar as part of our month-long online series 'Themes for your ISA in 2024' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
19 Jun 2024 Results analysis: Rockwood Strategic
RKW’s results show strong performance, with the momentum continuing post period end…
07 Jun 2024 Monthly round-up of investment trust news - #1
Jo and Ryan discuss the latest news in the investment trust world...
19 Jun 2024 Rockwood Strategic
Richard Staveley
Rewatch this webinar as part of our week-long June online series 'Small caps - a lost decade' hosted by the team at Kepler Trust Intelligence...
Watch Recording
29 May 2024 It’s a small world after all
A recent rally in smaller companies could be the start of a long-term recovery…
17 May 2024 The opportunity in UK small-caps with Rockwood Strategic manager Richard Staveley - Podcast: Trust Issues #30
We discuss opportunities for investors in the UK small-cap sector with RKW manager Richard Staveley...
07 May 2024 Thomas McMahon speaks on the Money Makers podcast
Thomas McMahon, Head of Investment Companies Research, appears on the Money Makers podcast to discuss three current themes in the investment trust sector: BCPT and commercial property, ASIT and split-level trusts, and the UK micro-cap sector...
01 May 2024 Rockwood’s concentrated micro-cap approach has delivered again
RKW’s phoenix-like performance shows there’s still hope for the UK…
10 Apr 2024 Micro-managing
What opportunities exist in the smallest part of the UK market?
03 Apr 2024 Tall poppies
We highlight those trusts having to print new shares to keep up with demand…
11 Mar 2024 A sentiment shifting statement?
Whilst light on detail, the announcement of a UK ISA is a step in the right direction…
28 Feb 2024 Catch a falling star
Our analysts discuss three discounted sectors that could be due a rebound…
20 Feb 2024 Talking Trusts: Interview with Richard Staveley, fund manager of Rockwood Strategic
We talk about the attractive valuations in the UK small-cap sector, M&A activity and the outlook for the sector…
04 Mar 2024 Rockwood Strategic
Richard Staveley
Rewatch this webinar as part of our month-long online series 'Themes for your ISA in 2024' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
06 Feb 2024 Make AIM great again
The number of small caps is falling, could AIM prove a source of alpha?
03 Jan 2024 Probably better asking an octopus
Our investment trust experts uncurl a tentacle each and choose their ‘top picks’ for 2024…
24 Nov 2023 Results analysis: Rockwood Strategic
RKW still has an exceptional long-term track record, despite a dip in the latest half-year period…
01 Nov 2023 Back to basics
Higher rates mean re-visiting portfolio construction...
14 Sep 2023 Fund Analysis
RKW’s focus on micro-caps with a value mindset offers a differentiated approach, with differentiated performance…
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