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ODYSSEAN INVESTMENT: Trust finds hidden value in smaller stocks

ODYSSEAN INVESTMENT TRUST: Funds Find Hidden Value in Smaller Equities


The investment trust Odyssey has never made the easiest start. Launched in May 2018 to profit from investing in the smallest listed company in the country, it had an ominous start before stocks plummeted towards the blockade in March last year.

However, since then, the trust has made progress with the stock price reaching £ 1.70 at some point. The stock is currently trading at £ 1.57 and will bring a 57% return to the first shareholder.

“We are absolutely pleased with the way things went,” says Stuart Widowson, managing partner of Odyssey Capital, an asset management company that manages a £ 148m trust. “It wasn’t easy, but 15% annual revenue shows that what we’re trying to do is working.”

The technique is built around picking stocks. Trust holds only 17 shares, with a focus on finding companies that are attractive to other investors at some stage. “We are looking for a business of hidden value, and at some point we want that value to be recognized by the rest of the market,” says Widdowson. “It’s the same idea that private equity managers apply when buying assets.”

Shares are usually disposed of when a company bid is placed. This allows the Odyssey to make a profit. This was the case of the sale of the position of inhaler maker Vectura (purchased by tobacco giant Philip Morris). Public relations company Huntsworth (sold to private equity last year). Consort Medical was acquired by Swedish pharmaceutical giant Recipharm shortly before its blockade last year.

The average size of a company that Odyssean seeks is between £ 200m and £ 400m in market capitalization. The market is minnow, but we expect the company to succeed and be credible and profitable in selling its holdings. The average market capitalization of disposal is £ 650m. The portfolio is biased towards healthcare, industry, business services and media equities. This reflects some of the expertise of the three advisors who provide ideas to Trust’s investment managers Widdowson and Ed Wielechowski.

Still, Widowson says there is no magic formula when it comes to finding a winner. “We read a lot,” he says. We also do a lot of calculations. Currently, we have a watch list of about 10 brands to buy when the price is right.

One of the events that managers are paying attention to is when the company appoints a new chairman. This can be a catalyst for change. For example, Trust purchased a position for the industrial company Flowtech Fluidpower in 2018 and added it in 2019 and early 2020. However, stocks began to make strong progress after Roger McDowell became chairman last August. Odyssean paid an average of just over £ 1 for shares currently trading at £ 1.37.

Among them, Ian Armitage, the manager and chairman of the trust, owns about 9 million shares of the fund, which is worth more than £ 13 million. Such skins in the game are often considered positive because they match the financial interests of shareholders with those of management. Moira O’Neill, Head of Personal Finance, Wealth Manager Interactive Investor, said:

The basic annual management fee for a trust is 1%, but if it exceeds the benchmark, a success fee will be charged. The stock market identifier is BFFK7H5 and its ticker OIT.

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ODYSSEAN INVESTMENT: Trust finds hidden value in smaller stocks

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