In a featured program on Fox Business, Royce & Associates portfolio manager, Bill Hench, gave tips to viewers on investing into small caps. The investor education program kick-starts with a recap of how the small cap story has been a “bit of disappointment over the past six months for retail investors as the Russell 2000 index has underperformed the S&P 500 index.”
Bill Hench, who is also the manager of the Royce opportunity select fund, was asked on the program on his views about existing commentary in the market about valuations in “biotech, social media and small caps” went on to highlight to viewers that, the “small cap world is huge. If we look at our universe of (small caps) a little over 15 percent of the names underperformed the Russell index at the half way mark of the year.”
Calling out the fact that “ we see opportunity in small caps this year, Mr Hench went on to share some tips for picking winning small cap stock to invest through the rest of the year.
The first tip he shared was that, “the most important thing is your entry point. You are going to get only one chance to buy a stock at the right price”. He advised investors to pay close attention to how much they pay for their stock, so that in the event of their bets going wrong, they won’t have to suffer huge losses, but can move on to other investment opportunities. He nailed the argument by saying that he is very much disciplined about price. He then went on to advise investors to diversify their stock holding, and look for companies which have a good turnaround story and have a competent management team.
Mr Hench then went on list out the top five small cap picks for his viewers to consider as investment opportunities. His list included the much paned retailer J C Penney Company Inc (NYSE:JCP). Mr Hench pointed out that in the event of J C Penney Company Inc (NYSE:JCP) managing to “get their debt in order and raise cash and get their customers back, which they have done and make a little bit of money”, then the stock would be a strong performer.
Carbonite Inc (NASDAQ:CARB) which is a $289 million cloud solutions and services provider also made it to Mr Hench top 5 list. He described the business run by Boston headquartered Carbonite Inc (NASDAQ:CARB) as a simple story, and went on to explain that, “They provide you with back up service for individuals. They do it for small business too, and have a good cash flow and is managed by a good set of people.”