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 high conviction approach has led to sector-leading returns…
Overview

Manager of Rockwood Strategic (RKW), Richard Staveley, looks to take advantage of the lack of research and limited institutional interest at the lowest end of the UK’s market-cap spectrum to find overlooked companies trading at significant valuation discounts to their intrinsic value and long-term potential. The manager often looks for companies that are going through challenging periods but have strong recovery potential or strategic initiatives that might unlock value. He will take large positions in these stocks, leading to a concentrated portfolio, which he manages with a highly active approach. This involves instigating change to unlock value for the benefit of all shareholders (see Portfolio).

This approach has delivered very strong Performance, with RKW one of the best performing trusts in the smaller companies sector over the long term. Richard has been manager since 2019, with the exception of a short period of corporate activity (see Management). Performance continues to be very strong, leading to excellent returns over both the near and longer term.

The strong performance has helped lead to the trust’s Discount narrowing significantly, and the shares moving to a sustained premium from 2023 onwards. The board has been active in managing this through ongoing share issuance. Authority to continue this was renewed in July 2024 to allow for further issuance, allowing the trust to grow and to help keep the premium close to NAV.

The manager has been using this share issuance to buy several new holdings, as well as the proceeds of M&A activity, after a number of holdings were bid for in late 2023 (see Performance). This outcome is typical of the manager’s process, which includes a full assessment of possible exit strategies when the initial investment is made. The portfolio now consists of 22 holdings.

Analyst's View

RKW’s sector-leading performance is the standout attraction of this trust in our opinion. Richard’s approach of finding out-of-favour companies at the lowest end of the market-cap spectrum and benefitting from their turnaround has repeatedly provided positive returns over multiple time periods. He uses the liquidity risk in this part of the market to his advantage by taking large stakes, often alongside existing investors minded to change, and looking to instigate a catalyst to generate shareholder value. This has meant that not only has the trust delivered stellar performance, but also means the portfolio will look completely different to other trusts in the peer group (see Portfolio).

Whilst stock-specific factors will be the primary driver behind performance, the current market outlook could also be a positive for the trust. Despite a recent pickup, we believe that UK smaller companies remain an under-owned and undervalued asset class. This means it may offer an alternative to the crowded trades seen elsewhere in the market, with sentiment showing signs of improving as macro-conditions continue to improve and interest rates begin to fall. We believe Richard’s high conviction portfolio would benefit well from an improvement in sentiment, as a positive share price move in just one or two holdings can have an outsized impact on NAV, as has been the case in 2024, leading to the exceptional relative and absolute Performance.

Bull

  • Performance over the near and long term has been exceptional
  • Portfolio is likely to be highly differentiated to peer group and index
  • Potential recovery in the sector could provide a tailwind to performance

Bear

  • Trust levies a performance fee, which could be off-putting for some investors
  • Portfolio is highly concentrated and has holding liquidity risk
  • Shares trade at a premium rating, in contrast to most peers that are at a discount
Continue to Portfolio

Fund History

06 Oct 2024 Get Rich Slowly: How I invest my money
Our investment specialist reveals the winners and sinners in her portfolio…
25 Sep 2024 No place like home?
Our analysts debate the benefits and drawbacks of investing in what you know best…
18 Sep 2024 Fund Analysis
RKW’s high conviction approach has led to sector-leading returns…
28 Aug 2024 Dream team
Our analysts review how their fund picks for 2024 have done…
10 Aug 2024 Don’t tell ‘em your name, Pike
Market turmoil throws up opportunities…
27 Jul 2024 We are the champions
We run our rule over the sectors gunning for glory in 2024…
13 Jul 2024 Ch-ch-ch-changes
Politics isn’t the only place where there are big changes at the top, but for shareholders change is often a good thing…
06 Jul 2024 America for growth, Japan for value
Different investment styles are needed for different regions…
21 Jun 2024 Ready for lift-off?
Managers at our small-cap event discuss the potential for smaller companies…
19 Jun 2024 Results analysis: Rockwood Strategic
RKW’s results show strong performance, with the momentum continuing post period end…
14 Jun 2024 Three ‘chiers’ for Macron
Whatever the outcome of the French president's gamble, turgid politics in Europe have far-reaching implications for investors…
07 Jun 2024 Monthly round-up of investment trust news - #1
Jo and Ryan discuss the latest news in the investment trust world...
04 Jun 2024 Investing in UK micro-caps with investment trusts
How investment trusts can provide investors with access to the high-growth UK micro-cap sector…
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...
19 Apr 2024 (Don’t) forget the price tag
With the dollar rallying once again, investors ignore foreign currency movements at their peril…
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…
08 Mar 2024 Ready steady go
We look back at the first week of our event, discussing sectors ripe for recovery…
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
03 Jan 2024 Probably better asking an octopus
Our investment trust experts uncurl a tentacle each and choose their ‘top picks’ for 2024…
15 Dec 2023 Outpacing the herd
RKW continues to unlock value for investors in the small-cap sector, with subdued valuations attracting bargain-hunters…
08 Dec 2023 Time to tell Sid?
British investors could be missing a trick by ignoring out-of-favour UK equities…
24 Nov 2023 An informational edge
Low levels of research create opportunity but aren’t enough to drive returns…
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...
20 Sep 2023 How small is small?
Rockwood Strategic's unique approach to UK small caps has delivered strong returns for shareholders…
15 Sep 2023 Pizza Tiger
You don’t need to reinvent the wheel to deliver good returns on your investment...
14 Sep 2023 Fund Analysis
RKW’s focus on micro-caps with a value mindset offers a differentiated approach, with differentiated performance…
View all

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