James Carthew: Why Rockwood is rocking the UK small-cap sector
Last week I relayed the view of Miton UK Microcap (MINI) fund manager Gervais Williams on the undervaluation of the UK smaller company market, and especially that of the very smallest listed companies. Following this, I caught up with Richard Staveley, manager of Rockwood Strategic (RKW), which fishes in the same waters as MINI.
You might wonder why MINI, for the reasons I outlined, is the worst-performing investment company in the sector over the past 12 months, with net asset value down more than 21%, while RKW is the best, with NAV up nearly 29%. The difference is one of style.
Williams backs quality growth stocks while Staveley is a value investor, looking to unlock that value by encouraging investee companies to change for the better. RKW, like AVI Japan Opportunity (AJOT) or RKW’s Harwood Capital stablemate North Atlantic Smaller Companies (NAS), is more in control of its fate.
Staveley feels that the general aversion to the UK and the lack of analyst coverage of smaller companies mean there are some spectacular bargains to be had. The best way of illustrating that might be to look at five examples. Apart from the first, all are current holdings in RKW, but – demonstrating the breadth of the opportunity available – none are among its largest positions.
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