2026; What does true intergenerational Family Office capital actually look for?
As one of the larger entirely internally funded Family Offices investing exclusively in small and micro cap UK equities, Iโm often asked about our investment criteria. My slightly tongue-in-cheek answer is usually:
โ๐๐ฉ๐ช๐ฏ๐จ๐ด ๐ธ๐ฆ ๐ค๐ข๐ฏ ๐ฉ๐ช๐ต ๐ธ๐ช๐ต๐ฉ ๐ข ๐ฉ๐ข๐ฎ๐ฎ๐ฆ๐ณ.โ
While not entirely literal, it captures something important โ we want companies we can genuinely understand (no Bitcoin treasury plays here). Businesses where we can grasp the products, the end markets, the competitive positioning and, crucially, how value is created.
We are attracted to:
* Profitable, cash-generative companies
* Clearly definable value-add propositions
* IP protection
* Predictable, reliable, predominantly forecastable cash flows
* Ideally with some embedded optionality in one or two divisions
Itโs one reason weโve been overweight UK-listed Industrials for several years (see our publicly disclosed positions in Zotefoams, Northern Bear Plc and our significant holding in Gulf Marine Services PLC). However, if you only read the headlines, you might conclude that UK manufacturing has long since declined beyond relevance. Look closer โ particularly at specialist, high value-add niches โ and the picture is rather different.
For patient capital willing to look through cycles and short-term headwinds, there are some remarkable businesses listed here in the UK which are often overlooked and undervalued. Our portfolio performance in 2025 (c.30%) and a solid start to 2026 suggest that some of these โunfashionableโ names may be returning to investorsโ focus.
Getting out of the City Bubble
Anyhow. Whilst all that theory is interesting, undoubtedly the best part of my job is getting away from the screens and into the โreal worldโ to see companies like these in action. So, over the past month Iโve been spotted wearing a silly knitted tie at two of our portfolio names; Castings P.L.C. and Carclo.
๐๐ข๐ด๐ต๐ช๐ฏ๐จ๐ด ๐๐ญ๐ค (๐๐๐)
Castings is an iron casting and machining group whose origins date back to 1835. It employs over 1,000 people and derives roughly 75% of revenue from the European heavy truck market. I visited their William Lee foundry in Dronfield recently and came away very impressed, despite the well publicised challenges the company has faced over the past couple of years. We added to our position following the visit.
Our thesis rests on two areas.
First, cash generation and cycle expectations. We think the market underappreciates:
* The level of cash generation in stronger periods (as evidenced by prior special dividends)
* The durability of the heavy truck cycle
Recent Volvo Q4 results increased the 2025 European heavy truck forecast by 10k units (+3%) to 305k โ broadly in line with the five-year average, despite earlier fears of a sharper downturn.
Second, growth markets. Castings has a growing business supplying protective components for undersea cabling in offshore wind. This is structurally attractive and, due to simpler mould requirements, carries higher margins than the core business. The market is forecasting relatively little for this sector, but my personal takeaway from the visit was that this could be a really important area for Castings moving forward.
In summary, we see:
* A core market more resilient than feared
* A higher-margin growth opportunity emerging
* A valuation that does not fully reflect either
Carclo to Carclo 2.0 (CAR)
This was my second visit to precision component designer and manufacturer Carclo, a newer position for us. We are firm believers in CEO Frank Doorenbosch's strategy to evolve from manufacturer to solutions provider (solving client problems rather than simply supplying components) and to become a 'precision partner in regulated markets'.
If executed well โ and there are encouraging early signs โ Frank and the wider team will continue to drive material improvements in:
* Margins
* ROCE
* Return on Sales
As a recent Panmure Liberum note put it, if โthe last two years have been all about securing a stable foundation from which Carclo can return to growthโ then the future is about โCarclo 2.0โ and executing on the move โup the โvalue curveโ by offering design and manufacturing solutions to clients for which it can charge premium prices along with โstickyโ customer relationships.โ
Alongside that:
* The pension deficit is reducing materially
* There is growing exposure to aviation and defence
* There is potential expansion into space related markets
* The group holds valuable freehold property assets
* The newly established innovation lab is beginning to make progress
* There is a credible path to net cash later this decade
On our estimates, a net cash position by 2028 and mid-teens EPS are realistic outcomes. The question is then how to value that. Taking Renold's takeout at c.10x last year as a realistic benchmark, we believe the current valuation materially undervalues the progress the company has made.
๐๐ ๐ช๐ฏ๐ฅ๐ถ๐ด๐ต๐ณ๐ช๐ข๐ญ๐ด ๐ฎ๐ข๐บ ๐ฏ๐ฐ๐ต ๐ฃ๐ฆ ๐ง๐ข๐ด๐ฉ๐ช๐ฐ๐ฏ๐ข๐ฃ๐ญ๐ฆ. But in foundries and factory floors across the country there are businesses with long histories, strong balance sheets and genuine competitive advantages. That is precisely where patient, supportive, long-term capital, with the ability to look through the cycle, can be most effective.
Very happy to discuss these or other ideas further. As ever, usual disclosures apply: BDFO holds positions in the companies mentioned. This is not investment advice โ please do your own research.
