| Valuation method | Value, £ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 165.63 | -45 |
| Intrinsic value (DCF) | 114.03 | -62 |
| Graham-Dodd Method | 4.66 | -98 |
| Graham Formula | 127.26 | -58 |
Rockwood Strategic Plc (RKW.L) is a UK-based investment trust specializing in strategic private and public equity investments, primarily targeting small and mid-cap companies in the UK and Europe. Managed by Gresham House, the fund focuses on undervalued opportunities, including PIPE (Private Investment in Public Equity), pre-IPO, growth, acquisition, and recovery capital investments. Rockwood invests across diverse sectors such as financial services, media, ICT, digital technology, healthcare, and life sciences, typically in firms with market caps below £250 million. The fund employs a disciplined investment approach, seeking stakes between 5% and 25% in companies with strong fundamentals—such as high ROCE (Return on Capital Employed), attractive free cash flow yields, and low EV/EBITDA multiples—while targeting a long-term net IRR of 15%. Rockwood’s portfolio includes both publicly listed (FTSE All-Share, AIM) and private companies, with a focus on turnaround and growth scenarios. Its strategy emphasizes active engagement to unlock value, making it a unique player in the small-cap investment space.
Rockwood Strategic Plc offers exposure to high-conviction, undervalued UK and European small-cap equities, with a focus on active value creation. The fund’s disciplined criteria (e.g., ROCE >10%, FCF yield >10%) and hands-on approach provide downside protection while targeting outsized returns. However, its concentrated portfolio (~10–15 holdings) and small-cap focus amplify volatility (beta: 1.11), and its niche strategy may underperform in bullish large-cap markets. The absence of debt and a £4.8M cash position (15% of market cap) offer flexibility, but reliance on illiquid private investments could pose liquidity risks. The 0.6p dividend (modest yield) signals income is secondary to capital growth. Attractive for investors seeking UK small-cap alpha, but suitability depends on risk tolerance.
Rockwood Strategic differentiates itself through its highly selective, concentrated investment approach, targeting deeply undervalued small-caps with operational turnaround potential. Unlike broader small-cap funds, Rockwood actively engages with portfolio companies (e.g., board participation, strategic guidance) to drive value—a edge over passive peers. Its focus on firms trading >50% below 3-year highs and EV/EBITDA <7x provides a margin of safety, while sector-agnostic flexibility allows opportunistic bets. However, its small AUM (~£99M) limits scalability versus larger small-cap trusts (e.g., Aberforth Smaller Companies). Competitors often prioritize liquidity or diversification, whereas Rockwood’s illiquid private holdings (e.g., P2P, convertibles) enhance return potential but increase complexity. Its IRR target (15% net) is ambitious compared to peers’ 8–12% benchmarks, reflecting higher risk/reward. Performance hinges on manager skill in identifying and executing turnaround situations—a niche where Rockwood’s team has depth but faces rising competition from activist funds.