Rockwood Strategic (RKW)

Rockwood Strategic (RKW) has outperformed even its lofty 15% annualised goal over the long term as a result of manager Richard Staveley’s bottom-up process that has led to a highly concentrated portfolio of undervalued, micro-cap companies (see Performance). This concentration, typically between 20 and 25 holdings, will enable the manager to take sizeable stakes in his holdings, supporting his approach of collaborating with management teams to help instigate a turnaround.

This strong performance has contributed to the trust trading at a premium rating (see Discount). The board has sought to manage this premium by issuing shares to meet the investor demand. In turn, this has led to an increase in the size of the trust, as well as raising cash for Richard to further deploy into the portfolio. This has been put to work in four new stocks in the past year, as well as top-ups to some existing holdings that Richard has identified as good value with recovery potential.

Furthermore, the manager has trimmed back a couple of his best performers in order to manage position sizes and capture the sizeable profits made. He has also had a full realisation in Galliford Try. The stock has been held for c. three years and delivered a 2.4x return on investment over that period, after executing its turnaround strategy, with which Richard was engaged throughout (see Portfolio).