Milkwood Capital was founded in 2013 by Rhys Summerton.  

Milkwood Capital is the fund manager for The Milkwood Fund, a Cayman Island Fund which seeks to grow the value of its investments at a rate above the overall market.

The investment objective of the Fund is to achieve long term capital growth through investing in equities listed in global markets.  The majority of the Fund’s investments are in companies listed on regulated stock exchanges.

The approach is to invest in a small number of companies (generally ten – twelve companies) that demonstrate the following characteristics:

  1. An Easy to understand business
  2. The business has a sustainable competitive advantage
  3. Management of these businesses must be able and trustworthy
  4. The valuation must be attractive

The Fund’s strategy will be to take a long term view on price appreciation and will make no attempt to time the market.  The levels of stock market indexes are of no importance to the fund’s decision-making process.

The Fund will generally stay committed to its investments for long periods of time with an average holding period of over three years.

The Fund has maximum flexibility to invest globally.  This allows the Fund to take advantage of mispriced companies opportunistically.  The Fund also has the flexibility to invest in any sector.

The Portfolio is broken down as follows:

Undervalued Companies:  The Fund will identify companies that have the potential to show significant appreciation over the long term.  This potential for appreciation will not require any specific corporate action or require the Fund to be involved with the management process.  It will rely on the market discovery mechanism.  It is likely that at least 50% of the Fund will be invested in this category. 

Workouts:  The Fund will identify companies that are undervalued but whose increase in value is dependent on certain corporate actions.  Such corporate actions will include sales, mergers, liquidations and tender offers.  It is likely that up to 30% of the Fund will be invested in this category.  This category may also enter into financing arrangements to make the overall return attractive, which may include gearing and hedging strategies to mitigate risk.

Active Investments:  The Fund will identify distressed companies which have the potential for a strategic turnaround.  These companies will require the Fund to take a role in the management or to work with the management to turn them around.  It is likely that up to 20 percent of the Fund will be invested in this category.

The instruments in which the Fund invests may be listed or unlisted

Investment Principals

  • Treat Investors as partners
  • Your returns are my returns
  • Maintain a lean cost structure
  • Highlight and honestly analyse mistakes
  • Conduct ourselves with integrity and fairness in all our dealings

Investment Ideals

We are not a value fund. We are not a growth fund. As Warren Buffett put it, growth is just a variable in the value equation. We are opportunistically seeking to buy companies that are undervalued. Not all our investments will be in great companies. Some may be. Sir John Templeton said "Looking for a good investment is nothing more than looking for a good bargain". That sums up our approach.

Our portfolio will include stocks you have never heard of. To beat the market you have to own stocks which most don't own. You have to do something different to the herd.

We are global...having a wide range of potential investment opportunities could only increase the universe of potential bargains, to our mutual benefit.

The ideal is finding stocks being offered in the market at a price we think will generate absolute returns above the market. What will the market do? We don't know. But since 1900 (including dividends) a 5.5% return is probably acceptable. If we can do better than that in the long run, we will consider the Milkwood Fund a success.