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Bargain Shares: A trio of mispriced investment opportunities

A private equity firm, a small-cap investment fund and a financial services group are all priced on attractive share price discounts to their book values.
Bargain Shares: A trio of mispriced investment opportunities

The aim of my annual Bargain Shares Portfolio is to not only outperform the market, but ideally by taking a lower level of risk.

For example, my 2016 motley crew of 10 small-cap companies has delivered a total return of 99.4 per cent, well above the FTSE Aim All-Share (41.3 per cent) and FTSE All-Share (56.5 per cent). However, I have exited seven holdings. This means that if you had invested £10,000 at portfolio launch you have recouped £13,500 in cash and still have £6,400 invested in three companies: private equity listed vehicle Oakley Capital Investments (OCI:380p), small-cap investment company Rockwood Strategic (RKW:1,370p) and fund manager Gresham House (GHE:830p). I am running with all three winners.

In the case of Oakley, the group has just announced the sale of its stake in Italy’s largest online price comparison platform, Facile.it, realising £53mn of cash at a 23 per cent premium to carrying value and adding 6p a share to Oakley’s net asset value (NAV) per share of 571p. Despite holding 20 per cent of the fund in cash, and investee companies' rising profitability the key driver of returns, the shares trade on an anomalous 34 per cent discount to spot NAV.

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