Kernow Asset Management commentary for the month ended June 30, 2025.
The strategy returned 1.3% in June, amid pockets of investor greed.
Good news. We’ve cracked it. We can now predict tomorrow’s UK equity headlines:
'Transaction in own shares
Transaction in own shares
Transaction in own shares
Transaction in own shares
Transaction in own shares
Offer for ABC plc
Transaction in own shares
Transaction in own shares'
Feeding the buyback has become a daily liquidity anchor. Nearly 180 UK-listed companies are currently repurchasing their own shares each day, and frankly, at these valuations, who can blame them?
In addition, 36 companies are currently under takeover offers. Staggering.
A New Position That Won’t Be Taken Over
We completed three mispricing reviews this month. All focused on high-quality companies that had fallen from grace over perceived problems that may or may not be true. Diageo, Spirax, and Bunzl. We weighed them. Measured them. Poked at their earnings models with sticks. After months of research and careful consideration, we decided to buy a small bank instead. Again.
Stop Buying Banks! Investors Don’t Like It
While updating our UK bank universe charts, one name gave me trouble. We dug into the accounts and corrected the numbers. Still, the company was trading at 0.33x its tangible book value. That is thirty-three pence for every pound. Effectively, earning a c.27% implied interest rate on cost.
It turns out the stock is hated, but not broken. It is profitable. It pays a dividend. We ran a quick risk and loan book review and lost two days of our lives. We smelled blood and kept swimming.
We called management, half-hoping they were terrible so we could move back to the highest quality company shopping list. Unfortunately, they were credible. The chair and the new team have a real plan. Now we own 1% of the bank. Watch this space.
We Were Wrong About Adriatic
Another one bites the dust. Adriatic Metals has accepted the takeover bid, despite the offer being dismal. So much value was left on the table that Dundee Precious Metals, the acquirer, saw its share price rise on the day. If you consult any textbook, that is not how takeovers are supposed to work. The buyer is meant to overpay.
RWS Short Closed; CEO has the Hardest Job
RWS is a translation company. In 2023, AI came for its margins and won. Ed flagged it early, and we were able to confirm the shift with channel checks. We took a short position. In essence, when the car was invented, you knew one thing for certain. The horse had lost.
Management held firm for years. This month, the new CEO finally admitted the problem. “this is about strategically repositioning RWS to stay relevant to client's future needs”. Translation: “We’re totally screwed unless we become an AI company now.” That was all we needed. We closed our short for a 70% gain.
Now we are foxed. AI is still in its early stages of evolution. The promised land of seamless agents remains more science fiction than science function. RWS has a plan. Or something that resembles one. It wants to partner with AI firms even more.
This is the corporate equivalent of saying to the invaders that you are willing to lend them your gun. And also sell them bullets. And maybe design a better gun while you are at it. If they don’t just shoot you, it could work well. RWS could embed its IP and expertise deeply within the future AI collective. That could make it essential to businesses and of high value once again. AI or die.
Also, Alyx is changing his name to Borg. Best be safe.
The Most Dangerous Force in The UK Right Now Is Bitcoin Treasury Adoption
Last month, the Kernow Index (our live map of all the companies) picked up severe distortions. Tiny companies with less substance than a wet paper bag surged to absurd valuations. The standout was Smarter Web Company plc (“SWC”), which started with a market cap of just £4m. After pivoting to a Bitcoin treasury strategy, its share price skyrocketed, turning it into a £1bn business.
Let that sink in. A billion. For a company that essentially rebranded itself as a crypto proxy.
The playbook? If Bitcoin equals greed, use the stock price momentum to raise equity and cycle it into more Bitcoin. Today, the market cap is roughly 13% backed by actual Bitcoin. The remaining 87% is story value. Hilarious, ridiculous, and it makes complete sense for struggling firms with nothing left to lose.
Here’s where it gets interesting. What we are looking for is the first decent-sized UK company likely to adopt this strategy. It will see a surge in retail interest, trading volume, and media attention. You might think no self-respecting CEO would stoop that low as to lose credibility at dinner parties. When the ducks are quacking, you either feed them or SWC will.
Since its inception in November 2019, the Kernow strategy is up 72%, compared with the UK equity market, which has increased 44% over the same period. The collective upside in the portfolio is worth more than 212%.
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