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A merger of two small cap trusts with very similar stock picking techniques makes sense
Thursday 13 Jan 2022 Author: James Crux


Gain to date: 72.3%

Original entry point: Buy at 97.5p, 10 September 2020

Shares in Odyssean Investment Trust (OIT) are up 72.3% since we recommended the UK smaller companies trust in September 2020. We see merit in the board’s proposal (23 Dec) to merge with rival Strategic Equity Capital (SEC), a deal that would reunite the latter trust with former manager Stuart Widdowson.

Odyssean is managed by Ed Wielechowski and Widdowson, who previously forged his reputation as a star small cap stock picker by driving the turnaround of Strategic Equity, another running Great Ideas selection trading at 314.5p, 4.3% above the 301.5p at which we recommended the shares in August.

Merger talks remain at an early stage, but 32.9% of Strategic Equity’s shareholders back the deal and Odyssean argues convincingly that a combination would create a leading trust differentiated from the wider UK small cap sector with strong liquidity, discount control mechanisms and crucially, ‘a premium rating and greater scale’, with the ability to reduce ongoing charges for shareholders.

Both trusts are highly concentrated UK small cap funds that apply private equity-style techniques to public markets. Should the merger proceed, the enlarged trust will be managed under Odyssean’s successful strategy, underpinned by a string of premium-priced takeovers.

SHARES SAYS: Keep buying Odyssean. 

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