- Encouraging start for small caps trust
- Hulse sees value opportunity in UK small caps
- Windward’s potential excites
Shares in Onward Opportunities (ONWD:AIM) rose 1.5% to 111.5p after the smaller companies-focused trust reported an 11.3% NAV (net asset value) total return to 106.5p for the nine months from its March 2023 IPO (initial public offering) to the end of December.
That performance compares to a 3.7% decline for the AIM All Share Index and demonstrates that manager Laurence Hulse’s process of spotting dynamic, yet undervalued companies and actively engage with them to realise hidden value is already paying off.
Last year’s takeover of DX Group provided an early example of the success of the Dowgate Wealth stockpicker’s approach.
Onward Opportunities first snapped up the courier’s shares at 32p before selling into a trade sale that realised 48.5p per share within six months of the investment.
ONWARDS AND UPWARDS
Launched to capitalise on the value opportunity in UK smaller companies, Onward Opportunities enjoyed an encouraging first financial year, outperforming the AIM All Share total return index by 15% despite difficult market conditions and negative sentiment towards the UK market’s small fry.
Since inception, the trust is a top decile performer in the Association of Investment Companies’ (AIC) UK Smaller Companies sector.
Onward Opportunities, which raised £12.8 million from an IPO priced at 100p per share, also trades at a premium which has enabled it to issue new shares and expand its capital base.
As of 31 March 2024, the company was ‘fully invested’ ahead of schedule into 10 core investments and 10 nursery holdings which represented 90% of the portfolio.
WHICH STOCKS DROVE THE OUTPERFORMANCE?
During Onward’s maiden financial year, the top five contributors to unrealised returns were online fishing equipment and tackle retailer Angling Direct (ANG:AIM), automated robotic packaging lines designer MPAC (MPAC:AIM), Cardiff-headquartered diagnostics business EKF Diagnostics (EKF:AIM), Scottish housebuilder Springfield Properties (SPR:AIM) and maritime artificial intelligence company Windward (WNWD:AIM).
In the statement, Hulse observed that Windward is ‘perhaps the most exciting business model’ in Onward’s portfolio with potential to be ‘one of the most value-creative investment theses too.’
For the uninitiated, Windward harnesses marine traffic data to provide analytical insights to a growing list of household names and global operators in two key maritime markets; supply chain logistics and regulatory/legal compliance.
‘Both these segments and the wider maritime industry are going through massive upheaval,’ explained Hulse, ‘and we believe Windward is extremely well placed to capitalise on this for shareholders.’
Other small cap stocks passing muster with Hulse include video games developer Team17 (TM17:AIM), cleaning, hygiene, and decontamination minnow React (REAT:AIM) and tool and equipment hire company Speedy Hire (SDY).
HULSE HAS HIS SAY
Commenting on Onward Opportunities’ results, Hulse stressed: ‘We have done what we said we would do; demonstrated an ability to raise capital repeatedly regardless of market conditions, deploy that capital using a high-touch investment style, and invest profitably delivering strong absolute returns.
‘The company made an encouraging start in the first financial year; delivering a one year NAV return of 14.0% since inception.’
The small caps specialist added: ‘An eclectic portfolio of situations and opportunities has been built by the team to take us into 2024 and beyond and resultantly the first quarter of full year 2024 has started encouragingly for our shareholders.’
