| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Rome Capital's interim report reflects on a turbulent first half of 2025 marked by geopolitical tensions and U.S. tariff policies disrupting global order. Despite challenging conditions, the firm executed successful investments in special situations and small-to-mid cap growth companies through disciplined bottom-up research. Key wins included Cake Box's strong execution with 19% EPS growth and NCR Atleos doubling from initial discovery as a successful spinoff. The firm learned valuable lessons about staying within competence circles, identifying market misconceptions, and using derivatives to profit from uncertainty, as demonstrated with Sable Offshore's binary regulatory outcome. However, some investments like Gentoo Media and Samsonite provided costly lessons about business complexity and cyclical headwinds. Looking ahead, the manager expects continued uncertainty with elevated U.S. market valuations likely to decline as tariffs impact costs. The firm remains confident in its enhanced approach to generating alpha through careful research, disciplined portfolio management, and conviction-driven decisions in overlooked areas of the market.
Special situations and small-to-mid cap growth companies in developed markets continue to offer compelling opportunities amid market turbulence, with disciplined bottom-up research and conviction-driven decision making being key to navigating uncertainty.
Uncertainty expected to remain the defining feature of the second half. Enhanced approach being applied to new ideas with continued confidence in ability to deliver strong long-term results.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Sep 3 2025 | 2025 Q2 | 1910.HK, CBOX.L, NATL, REVG, SEG, SOC | Derivatives, growth, small caps, special situations, spinoffs, turnaround, value |
CBOX LN NATL SOC US REVG US SEG US 1910 HK |
Rome Capital navigated turbulent H1 2025 through successful special situations investing, with wins like Cake Box and NCR Atleos offsetting lessons from Gentoo Media and Samsonite. The firm enhanced its approach using derivatives and staying within competence circles. Despite elevated U.S. valuations and tariff headwinds ahead, management remains confident in delivering strong long-term results through disciplined bottom-up research in small-to-mid cap opportunities. |
| Jan 26 2025 | 2024 Q4 | 1114.HK, 1910.HK, 3990.HK, CBOX.L, CPRI, EDEN.PA, NATL, PLX.PA, REVG, SEG, SN | Concentration, Franchising, gaming, growth, small cap, special situations, spinoffs, value | - | Rome Capital pursues exceptional returns through concentrated special situations and small-cap growth investments, exploiting institutional inefficiencies in spinoffs and forced selling scenarios. The 10-position portfolio includes undervalued opportunities like Brilliance China's BMW stake and Cake Box's franchise expansion. Despite elevated market valuations, the bottom-up approach continues finding compelling ideas with significant upside catalysts expected to materialize in 2025. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q2 |
Special SituationsManager emphasizes special situations as compelling opportunities amid market turbulence, particularly spinoffs and restructurings. The approach focuses on forced selling creating attractive entry points, though notes that multiple expansion requires strong business fundamentals beyond just the special situation setup. |
Spinoffs Restructuring Forced Selling Multiple Expansion Turnaround |
Small CapsSmall-to-mid cap growth companies in developed markets continue to offer compelling opportunities according to the manager. The firm's bottom-up approach allows them to uncover attractive investments in this space, with focus on areas often overlooked by large institutions. |
SMID Cap Growth Bottom-up Developed Markets Alpha Generation | |
| 2024 Q4 |
Special SituationsRome Capital focuses on spinoffs, bankruptcy emergences, merger arbitrages, asset sales, and large share buybacks where significant changes occur in capital structure or shareholder base. Stock pricing becomes highly inefficient due to forced or indifferent selling by large institutions, creating opportunities to leverage behavioral edges. |
Spinoffs Merger Arbitrage Asset Sales Buybacks Forced Selling |
Small CapThe fund targets small and mid-cap growth companies, focusing on finding young champions and analyzing their fundamentals while engaging with industry experts. Large institutions often avoid these due to liquidity constraints, giving Rome Capital an edge to become the most knowledgeable investors in these companies. |
Growth Small Caps Liquidity Fundamentals Young Champions | |
GamingPortfolio includes positions in gaming-related companies including Gentoo Media (online gaming affiliate) and a leading US casino operator. The gaming sector faced valuation pressure due to economic uncertainty and high leverage, creating compelling investment opportunities with significant upside potential. |
Casinos Online Gaming Gaming Affiliate Digital Gaming Sports Betting | |
FranchisingInvestment in Cake Box demonstrates focus on franchise business models that are capital-light, highly profitable, and scalable. The franchise model enables companies to leverage scale advantages in marketing, product development, and sourcing while securing prime locations. |
Franchise Model Capital Light Scale Advantages Network Effects Recurring Revenue |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Sep 3, 2025 | Fund Letters | Alex Feng | SEG US | Seaport Entertainment Inc. | Consumer Discretionary | Leisure Facilities | Bull | New York Stock Exchange | Liquidity, realestate, spinoff, turnaround, Volatility | Login |
| Sep 3, 2025 | Fund Letters | Alex Feng | NATL | NCR Atleos Corporation | Information Technology | Technology Hardware, Storage & Peripherals | Bull | New York Stock Exchange | ATM, Outsourcing, rerating, services, spinoff | Login |
| Sep 3, 2025 | Fund Letters | Alex Feng | 1910 HK | Samsonite International S.A. | Consumer Discretionary | Apparel, Accessories & Luxury Goods | Neutral | New York Stock Exchange | consumer, Cyclicals, tariffs, Travel, valuation | Login |
| Sep 3, 2025 | Fund Letters | Alex Feng | SOC US | Sable Offshore Corp. | Energy | Oil & Gas Exploration & Production | Bull | OTC | Derivatives, energy, Regulation, Specialsituations, Volatility | Login |
| Sep 3, 2025 | Fund Letters | Alex Feng | CBOX LN | Cake Box Holdings plc | Consumer Staples | Packaged Foods & Meats | Bull | New York Stock Exchange | Cakes, consumer, Franchising, growth, Margins | Login |
| Sep 3, 2025 | Fund Letters | Alex Feng | REVG US | The Shyft Group, Inc. | Industrials | Specialty Vehicles | Bull | NASDAQ | Margins, Options, Specialtyvehicles, tariffs, turnaround | Login |
| TICKER | COMMENTARY |
|---|---|
| CBOX.L | Cake Box has delivered exactly what we anticipated. The company accelerated store openings (from 20 to 26) and improved its underlying EBITDA margin (from 19.7% to 20.6%). EPS grew 19% in FY2025, and the stock price rose to over 200p from 140p since we commenced our research. We remain optimistic about Cake Box's core UK business. At the same time, the company has taken bold steps this year: acquiring Ambala, a well-known Indian snack brand in the UK, and opening its first international store in Paris. These initiatives naturally add uncertainty and risks, but we believe their potential upside is not reflected in the current valuation, with the stock still offering a 5% dividend yield. |
| NATL | NCR Atleos has been one of the most successful spinoffs in recent memory. The real opportunity came from recognizing what many others refused to see. In conversations with North American and European investors, we repeatedly saw them shut down at the mention of 'cash' and 'ATM,' or dismiss the story because of painful prior experiences with NCR. Few were willing to listen to the fact that a pivot toward ATM-as-a-Service (ATMaaS) would significantly expand its TAM even if overall ATM demand is going to decline, and the new management team has delivered much better results in the recent years. As Atleos began to execute and, later, as a highly respected investor published a detailed bullish report, the stock nearly doubled from where we first discovered it. We believe its re-rating journey is still in the early innings — many investors are only now beginning their research. |
| SOC | Sable Offshore is a California-based oil company that acquired suspended assets from Exxon Mobil and has been trying to restart oil production. Its efforts were repeatedly delayed by a Cease & Desist order from a local authority - CCC (the California Coastal Commission). In our view, the legal outcome was essentially binary: either the stock would be worthless if the ruling went against Sable, or it could trade above $40 if production restarted, based on peer valuations. At the time, the stock traded around $20 — roughly a 50/50 probability priced in. On February 12, the local government announced that Sable did not, in fact, need CCC approval to proceed with its assets. The stock quickly surged into the $30s. |
| REVG | REVG has been a successful special situation investment: the management sold and closed non-core businesses, capitalized on the upcycle in fire trucks and ambulances, and executed a turnaround plan materially better than expected. By fiscal Q2 2025, the Specialty Vehicle segment achieved an adjusted EBITDA margin of 12.4% — way ahead of consensus. We believe segment margins can expand into the mid-teens, consistent with best-in-class peers. While the stock has appreciated meaningfully, risks remain. A potential recession could further pressure the already soft RV market. New tariffs already add some cost headwinds, and a resurgence of inflation could erode margins, particularly given the company's three-year fixed price backlog. |
| SEG | Seaport is another special situation investment underway: it combines the spin-off with rights offering, a large asset sale on the horizon, and a bold turnaround plan under new leadership. Seaport's execution has been consistent with management's guidance. Despite these achievements, the stock has been very volatile year-to-date — falling into the $17s in Q2 before recovering to the $25s after the land sale. We attribute this to ongoing cash bleeding, an unfavorable macro and political backdrop, and our own overestimation of the near-term cash flow breakeven timeline. We acted proactively to take advantage of the 250 Water Street land sale, an asset-sale special situation, to recover a portion of losses. While we remain confident in Seaport's long-term turnaround, we will look to expand our position when there is a more attractive entry point. |
| 1910.HK | We initially believed Samsonite would benefit from a U.S. dual listing, where the market typically awards higher multiples than in Hong Kong. While that logic still holds, the reality is that potential multiple expansion cannot outweigh a cyclical business decline in a macro downturn. In hindsight, Samsonite was more of an 'okay business' than a compelling compounder. It rode the wave of post-COVID pent-up demand in 2023 and H1 2024, but luggage demand is unlikely to accelerate in today's environment, especially with added uncertainties from the tariff war. Given the combination of weak fundamentals, macro headwinds, and management's stance, we chose to close our position. |
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