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Get inspired by 12 (!) such small-cap stock ideas.
They are all worth looking into further, and disclosed to you for free in today's article (plus a few pointers to guide your own research).
Why such a list?
You may wonder, why would I reveal an entire dozen investment opportunities in a single article – and for free?
Keep in mind what my Weekly Dispatches are, and what they aren't.
I use my free weekly article to experiment with controversial theses, to fish for feedback about questions that I suspect some of my readers will know a lot about, and as dumping ground for stuff that I cannot use elsewhere.
Today's article is a case in point.
I have SO many interesting investment ideas hailing from Britain that I could turn Undervalued-Shares.com all-British for the remainder of the year.
However, I'd like to spend more time on US opportunities and stocks from elsewhere in the world.
Not wanting to let my collection of London-listed investment opportunities go to waste, I decided to empty out my folder of British stock ideas.
I haven't done a deep dive on any of the following ideas.
All of them seem like interesting ideas.
You can pick and choose which ones you think are worth looking into further, and then do your own research.
For a service that's for free, that's a good as it gets.
(My in-depth research reports dig into individual stocks in much more detail, but these are reserved for my paying readers.)
Let's delve right in…
#1: The Artisanal Spirits Company
At a recent dinner hosted for for readers in Edinburgh, one attendee (a high-calibre corporate fund manager) pointed me towards The Artisanal Spirits Company (ISIN GB00BNXM3P96, UK:ART). Despite my liking for quirky situations, I had never heard of the company before.
One of the firm's subsidiaries is more widely known: The Scotch Malt Whisky Society (SMWS), a membership organisation that bottles and sells single cask, single malt whisky. It purchases individual casks from more than 170 malt whisky distilleries in Scotland and throughout the world.
The Artisanal Spirits Company floated in 2021, when e-commerce companies were all the rage. This was the era when Naked Wines (ISIN GB00B021F836, UK:WINE) was reputed to become "the Netflix of wine" and attracted global investor attention. The Artisanal Spirits Company used the euphoria to raise GBP 15m of fresh equity and help some existing investors cash out to the tune of GBP 11m.
Following its initial placement in mid-2021 at 112 pence per share, the stock is now down at 35 pence. The company's market cap is a mere GBP 25m. It has struggled with waning demand after the end of pandemic lockdowns, and its members did not purchase quite as much whisky as it had hoped. Some sceptical investors are questioning the viability of the entire membership model.
The Artisanal Spirits Company.
Interestingly, The Artisanal Spirits Company has a potentially valuable asset: 18,000 casks, which are on its balance sheet "at cost" at GBP 26.5m. An independent report pegged the inventory's market value at GBP 102m, a valuation which received some backup from creditors. If the casks were used to fill up and sell small bottles, these liquid reserves could generate over GBP 500m of retail sales and over GBP 300m of profit, if the company's claims are to be believed.
Coulda, woulda, shoulda – will such a scenario ever occur?
The Artisanal Spirits Company has plenty of issues, which Investors' Chronicle analysed in some detail on 10 October 2024.
'Liquidity' is another real issue for the stock – no pun intended. Very little stock is changing hands.
Real value could be locked up in this company, though. If anything, whisky lovers will want to look into buying the stock instead of investing into casks or bottles. You can start investing by downloading the company's latest investor presentation.
#2: Chapel Down Group
Another drinks company that is currently down-and-out is Chapel Down Group (ISIN GB0032706284, UK:CDGP). It's not just England's biggest and best producer of still and sparkling wines, its brand name has almost become a byword for wine from England. You can go into any British supermarket, and there'll probably be Chapel Down on the shelves.
Much as English wine has become a surprising success story, the stock of Chapel Down has done less well. The company used to trade on an OTC-style market in the UK and moved up to the AIM market in late 2023. The stock has since halved from 78 pence to 34 pence. Its market cap is GBP 58m.
Chapel Down Group.
Investing in English wine had become a thing of late, as foreign investors are betting on the undoubted quality of the product and want to virtue-signal about positioning themselves for so-called climate change. As the Financial Times reported on 25 June 2024, "investment in English land has soared as foreign winemakers have spotted an opportunity to de-risk by making wine in England's comparatively cooler climate." In a separate Big Read feature that same month, the pink one explained "How English wine came of age".
You would have thought this would make someone wanting to snap up Chapel Down. Unfortunately not – at least not yet.
In June 2024, the company announced that it was looking for a sale or a strategic partner.
No sufficiently attractive transaction had been identified so far, though. As announced to shareholders, Chapel Down will continue as a stand-alone listed company, and replace its leadership.
News about the sale being called off and the management change prompted the stock to fall to half its value.
One would assume this was too harsh a reaction from the investor community.
#3: Cadogan Energy Solutions
If you like it wild and dangerous – but with very high upside – then look into Cadogan Energy Solutions (ISIN GB00B12WC938, UK:CAD). It's a micro-cap with a GBP 11m market cap.
The company owns an oil and gas project in Western Ukraine. As stated on its website, "the group's assets are located in the prolific Carpathian basin in close proximity to gas distribution infrastructure and far from the zone of military confrontation with Russia."
In 2024, the project produced about 350 barrels of oil per day – tiny, but not zero.
Cadogan Energy recently won a lawsuit and will have received a EUR 10m payment at the end of January 2025. Altogether, it should now be sitting on GBP 20m of cash – so much cash that a liquidation would still yield a profit even if the oil operation was vaporised.
The company has the Salik family among its major shareholders. Pierre Salik, the patriarch, had to deal with a fair share of controversies during his lifetime. E.g., he was once caught bribing police officers in Monaco and thus may not have been the greatest major shareholder to invest alongside.
Few will have noticed yet that Salik died aged 95 on 27 January 2025.
Cadogan Energy Solutions.
Will his heirs be easier to deal with and do something sensible with the company?
#4: AssetCo
Another case of a company with a successful but controversial leader is AssetCo (ISIN GB00BQ2K3557, UK:ASTO). As the Financial Times remarked in April 2024, "AssetCo is one of the only UK public companies to have an all-male board". One wonders, could this company even have gone as far as choosing its board members based on merit rather than sex? It all sounds utterly shocking!
AssetCo is a vehicle created by Martin Gilbert, one of the senior figures of Britain's asset management industry. Gilbert had made his name as a dealmaker in the City during his time at Aberdeen, the asset manager he co-founded in 1983 and which has more recently turned itself into a running joke when rebranding as abrdn. With AssetCo, Gilbert wanted to buy up smaller asset managers and consolidate them into a larger unit (in case you wonder how this creates value, check out "Roll-ups – how to invest into industry consolidators and serial acquirers").
In early 2024, Gilbert faced an investor backlash over the lack of so-called diversity on the AIM-listed company's board. This followed on from a difficult 12 months when losses widened and the share price fell by nearly half.
The City grandee has taken action by planning to split the company into two. The asset management business was going to remain listed but rebrand as River Global. The company's investment website for advisors was supposed to move into an unlisted spin-off, Parmenion. As Gilbert said at the time: "The splitting of shares is designed to try to solve the issue of the sum of the parts not reflecting what we think is the true value of the company. That will allow shareholders to hold whichever share they want in the business."
On 28 January 2025, AssetCo finally announced that it will go ahead and re-organise by splitting into River Global and Parmenion. The shareholder meeting to vote on the split will take place on 6 March 2025.
Is the stock really undervalued, and will the reorganisation lead to a coiled spring effect? With the share off 85% since 2021 and the reorganisation about to happen, now is the time to analyse this situation a bit further. Who knows, maybe the company's approach of hiring board members based on merit rather than sex will soon attract a premium? Personally, I salute Gilbert for sticking to his guns and not giving in to the woke police.
#5: Severfield
Who would think that there is still a company processing steel in Britain? Amazingly, there is. Severfield (ISIN GB00B27YGJ97, UK:SFR) is a bit of a dinosaur, and even among out-of-favour British stocks, it looks a bit like a leftover from a past era.
Its stock price reflects as much. After losing 80% during the Great Financial Crisis of 2008, the stock never quite recovered. The share price has gone sideways – although even that may be a bit of an understatement. In November 2024, it dropped by 50% overnight when the company put out a profit warning, and it hasn't staged much of a recovery since.
Severfield.
There is one staunch buyer in the market, though. Severfield itself is steadily buying back significant numbers of its own stock.
Is this akin to throwing good money after bad?
Quite possibly, it's not.
Severfield's British steel operation may be struggling, but the company has a booming subsidiary in India. The Indian operation is expanding, and it may be spun off or sold. A sale could yield a tidy one-off cash influx. Severfield has a strong balance sheet, and a sale of the Indian subsidiary could result in a special dividend.
What if Britain decided it needed to support the remnants of its steel industry because it is suddenly relevant for defence?
Severfield seems like an unlikely case for a potential investment, but that's what makes it interesting to look at now.
#6: abrdn European Logistics Income
If you like nearly risk-free returns that far exceed interest rates on bank deposits, you should check out abrdn European Logistics Income (ISIN GB00BD9PXH49, UK:ASLI). It's one of many British investment trusts that has decided to wind down and return capital to shareholders.
One of my readers introduced the stock at a recent dinner in London. As he put it: "The NAV is 75 pence, the stock price is about 60 pence. The NAV in my opinion is solid, as evidenced by the recent update on the wind-up. Assuming 5% wind up costs and a bit of NAV slippage (no evidence of this), 70 pence out in a weighted nine-month time period (which I think is very reasonable) is 17% upside, so an IRR of almost 20% with very little risk. Not a multi-bagger but as a risk adjusted return hard to beat."
A slightly more detailed analysis was published recently by Special Situation Investments, one of the best investment websites I know of (and well worth its subscription fee). If liquidation situations tickle your fancy, their article on abrdn European Logistics Income alone is already worth subscribing. Thanks to the trust's market cap of GBP 250m, a decent amount of stock is changing hands every day.
abrdn European Logistics Income.
#7: JZ Capital Partners
Another investment trust in wind-down is JZ Capital Partners (ISIN GG00BT3MVL31, UK:JZCP).
This is a situation with a fair amount of hair on it. The trust is invested in companies and real estate in the US and Europe and has lost about half of its money over a ten-year period. It subsequently went into wind-down, but valuing the assets and estimating the wind-down period is less straightforward than in the case of abrdn European Logistics Income. The stock is trading in British pounds but the net asset value is reported in US dollars. Speak of making it difficult for investors!
However, it is this lower degree of visibility that could be rewarded with a higher pay-off. JZ Capital most recently reported a net asset value of USD 4.10 per share. The stock is trading at 210 pence (GBP 2.10), which converts to USD 2.62 – a 36% discount. Moreover, realisations could deliver some pleasant surprises, as pointed out by The Oak Bloke in a 26 January 2025 analysis of the case.
All of these wind-down situations amount to sifting through the garbage bin, but as the saying goes "Where there is muck, there is brass."
#8: Ocean Wilsons
Asset sales and potential capital returns are currently a big subject among British small-caps. One of the more complex situations is that of Ocean Wilsons (ISIN BMG6699D1074, UK:OCN), a Bermuda-based investment holding controlled by a family.
For the past one and a half decades, the stock of Ocean Wilsons hasn't gone anywhere. The lacklustre performance may have played into the decision to sell its large Brazilian asset, a port and maritime logistics company. The sale has been agreed for USD 590m. There is some remaining regulatory risk, but it looks more likely than not that the deal will go through. The price has been agreed in Brazilian real, which adds currency risk.
The sales proceed equals about GBP 12.50 per share, which is not far off the current price of GBP 13. One of the participants of my recent Edinburgh dinner was Duncan MacInnes, a well-known fund manager who sits on the senior asset allocation team of Ruffer. As Duncan pointed out during our dinner conversation, the board of Ocean Wilsons intends to return "a meaningful proportion" of the sale proceeds to shareholders. It's not yet known how much, and it's also not yet clear if it will be done as a capital return, a special dividend, or even involve a merger or a wind-down situation.
Two-thirds of Ocean Wilsons' value consists of the sale in Brazil, and the other third is an investment in the Hansa Investment Company (ISIN BMG428941162, UK:HAN & UK:HANA). Hansa is an investment trust with holdings in other investment trusts, and it has a dual share structure. Could anyone have made it more complicated if they tried?
It's safe to assume, though, that there is value waiting to be unlocked.
I had long wanted to write about this situation but refrained from doing so because I know some of the directors personally. I did not speak to anyone of them about Ocean Wilsons or Hansa – this is an idea that came out of one of my dinners with readers.
#9: DCI Advisors
There is a running joke that the British stock market is priced as if the entire country was going out of business... Indeed, many publicly listed British companies are actually going out of business!
Liquidations can be a lucrative affair. One such case is DCI Advisors (ISIN GG00BSWT8V72, UK:DCI), a former closed-ended real estate fund once known as Dolphin Capital Investors. In the late 2000s, it raised EUR 1bn and created the world's largest portfolio of coastal development land.
The managers robbed shareholders blind but were eventually disposed off by activist investors specialised in winding down investment trusts. DCI is now down to its last remaining investments in Croatia, Greece, and Cyprus. These are all booming destinations!
I had featured the company in an extensive research report for Undervalued-Shares.com Lifetime Members. The stock subsequently went through a period of being suspended because of a delayed audit, but it's now trading again.
The company's net asset value was just confirmed as EUR 0.14, which equates to GBP 0.116 (= 11.6 pence). The stock is trading at GBP 0.05 (= 5 pence). The company is heading for liquidation, with the wind-down expected for 2026. There is a valuation gap of over 100% that needs closing until then. One of the reasons for the large gap is the ongoing legal feud between the company and the former managers. This legal issue is not entirely without risk, but it also has upside – and it'll probably be resolved before too long through a settlement.
What are you waiting for? It's too good a liquidation case to ignore.
#10: Watches of Switzerland
For those looking to buy into less obscure situations, The Watches of Switzerland Group (ISIN GB00BJDQQ870, UK:WOSG) is worth investigating. The company operates 221 stores in the UK, the US, and Europe, selling Rolex, Omega, TAG Heuer, Breitling, Tudor, Audemars Piguet, Seiko, and Bulgari.
Rolex is the king of watch brands, but it's a privately held company and investors cannot get direct exposure to it. Watches of Switzerland often gets thrown around as the one and only indirect play on Rolex.
As a proxy for luxury watches and Rolex, the stock benefited from the Rolex hype of the pandemic. It subsequently cooled off, and then got knocked for six when rumours circulated that Rolex might end its relationship with the company. Between January 2022 and spring 2024, the stock lost 75% of its value. Rolex subsequently confirmed that any such rumours were unfounded.
The Watches of Switzerland Group.
The stock has since started to recover, and an interesting long-term growth play could be in the making. Besides piggybacking from Rolex' growth, there could be room for Watches of Switzerland to expand its store footprint in the US, in particular, or even list in the US (if Rolex didn't swoop in to buy the entire company, as it did with the Bucherer retail chain in Switzerland).
Besides, Watches of Switzerland's operative performance has been improving again of late.
Source: The Telegraph, 23 October 2024.
There are plenty of reasons to like Watches of Switzerland. One excellent write-up about the company was published by Hidden Gems Investing in August 2024 while a more recent analysis came out on European Value Investor in January 2025. Last but not least, another regular attendee of my London dinners pointed me towards "Watches Of Switzerland Group: A Value Investor's Rolex" published by Eagle Point Capital in May 2024.
This is a company (and a stock) that could rise above the malaise of Britain's stock market and become an internationally known growth stock.
#11: Vistry Group
Another case from the department of more liquid stocks is Vistry Group (ISIN GB0001859296, UK:VTY). Vistry seemed like a promising housebuilder in September 2024, when its stock was trading at 1,400 pence, but it has since collapsed to 600 pence and now has a market cap of GBP 2bn.
Vistry Group.
Vistry was covered by quite a few interesting write-ups, the most outstanding published by Crossroads Capital in December 2023. The 25-page analysis describes in fascinating detail why Vistry is best compared to US-listed NVR (ISIN US62944T1051, NYSE:NVR), a slow-growing, capital-light US housebuilder that has repurchased over 75% (!) of its shares over the last 30 years.
NVR.
Yet Another Value Podcast published an excellent deep-dive on Vistry in January 2024, while The Very Good Value Blog carried an in-depth piece in December 2024.
Since then, the stock is down by a lot. What won't have changed is the chronic undersupply of Britain's housing market and Vistry's differentiated business model.
Is it time to revisit this thesis now that the stock price has been blown to smithereens?
#12: Baltic Classifieds Group
Are the companies on today's list too Old Economy for you?
The London market offers some surprise finds for anyone looking for growth stocks. Oftentimes, this involves companies from elsewhere who have chosen to list in London.
One such case is Baltic Classifieds Group (ISIN GB00BN44P254, UK:BCG), a Lithuanian company that specialises in classified portals. Think Craigslist, but for the Baltics. Baltic Classifieds subsequently expanded to Latvia and Estonia, and in 2023 became the third unicorn company hailing from Lithuania.
As one reader with deep knowledge of this particular sector recently told me: "Seems like a nice setup… >20% revenue growth, 78% margins, and a long runway for monetization."
The stock has nearly doubled since listing in 2021, and it now has a market cap of GBP 1.6bn.
A hidden compounder?
Baltic Classifieds Group.
The company's December 2024 investor presentation makes for compelling reading.
An online classifieds operator focused on the Baltics might not be what investors first think of when waking up in the morning, but it could be an interesting stock to look at for that very reason.