XP Power Ltd (LSE:XPP), 4imprint Group Plc (AQSE:FOUR) and Alpha Group International PLC (AIM:ALPH) are the most widely held stocks by investment trusts that focus on the UK smaller company sector.
Each appears in the portfolios of eight different London-listed investment funds, according to research by the Association for Investment Companies.
Analysing the holdings across all 22 trusts in the sector, the research found that Bloomsbury Publishing PLC (LSE:BMY) was the next most popular, chosen by seven trusts.
Alpha Group, up over a third in the past year, hit an all-time high earlier this month. Shares in XP Power, however, after turning down a bid from US-based Advanced Energy last year, fell to a 15-year low last month. Somewhere in between, 4imprint surged to all-time highs last year but has also dropped recently, sinking to its lowest in almost three years.
Other frequently held names include Gamma Communications (AIM:GAMA), Hill & Smith Holdings PLC (LSE:HILS), Workspace Group PLC (LSE:WKP), GlobalData PLC (AIM:DATA) and Videndum PLC (LSE:VID).
In total, 39 companies are each held by at least five trusts in the sector.
XP Power, held by Odyssean Investment Trust and The Henderson Smaller Companies Investment Trust, was praised for its global customer base across healthcare, industrial and semiconductor sectors.
Stuart Widdowson of Odyssean said: “XP Power is one of a handful of market leading power supply businesses with strong and long-term global customer relationships in industrial, semiconductor and healthcare sectors.”
Managers that have bought 4Imprint cite its dominant US market position in promotional gifting and strong cash flow.
Georgina Brittain, co-manager of JPMorgan UK Small Cap Growth & Income, holds 4imprint. She said: “With a market share of around 5%, 4imprint is still the market leader in promotional gifting in the USA and is growing rapidly in the UK. Currently buffeted by concerns over the US economic environment and the potential tariff impacts, we expect 4imprint to prove itself a long-term winner, as it has in the past.
"The company has experience of previous downturns and indeed of the impact of US tariffs, and has a playbook of how to manage them, such that it is well positioned to benefit coming out the other side."
XPS Pensions Group, held by six trusts, is expected to benefit from increased demand for advisory services in the pensions sector.
Brittain said she is particularly optimistic about the pensions consultant. "We believe that the company is well positioned to benefit from regulatory changes necessitating increased demand for advice from pension schemes.
"XPS is also helped by a changing competitive landscape, with scheme trustees now required to retender for services more regularly, which has favoured medium-sized challengers such as XPS over the large incumbents. This has already begun to manifest in earnings delivery consistently ahead of the market’s expectations, alongside several hikes in the dividend."
Bloomsbury Publishing, held by seven trusts, combines general and academic publishing.
Charles Montanaro of Montanaro UK Smaller Companies Investment Trust said: “It is the only UK-listed publisher to combine general and academic publishing under one roof – a strategic advantage that brings stability and resilience.”
The UK Smaller Companies investment trust sector currently trades at a 12.00% discount to net asset value, according to the AIC.
Communications Director Annabel Brodie-Smith said: “Smaller companies are far less researched than large caps, and investment trust managers are well placed to spot future winners.”