Royce & Associates LP, a widely-known small-cap equity specialist, was founded by highly-regarded mutual fund manager Charles M. Royce in 1972. The New York-based investment firm has pioneered small-cap investing for more than four decades and currently manages micro-cap, small-cap, and small/mid-cap portfolios. Royce & Associates seeks to identify promising companies with healthy balance sheets, high internal rates of return, and excess cash flow, so the firm’s equity portfolio most likely includes numerous highly-promising investment candidates. Given that Insider Monkey is a prominent believer in the underlying growth potential of the small-cap equity space, we decided to lay out a list of the five top stock picks embedded in the equity portfolio of Royce & Associates.
Our backtests that covered the period between 1999 and 2012 showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
#5. Federated Investors Inc. (NYSE:FII)
– Number of shares owned by Royce & Associates (as of March 31): 4.96 Million
– Value of Royce & Associates’ holding (as of March 31): $143.20 Million
Royce & Associates cut its stake in Federated Investors Inc. (NYSE:FII) by 233,731 shares or roughly 4% during the March quarter, to 4.96 million shares, which were valued at $143.20 million at the end of March. The U.S investment manager, which had nearly $370 billion in managed assets on March 31, has seen its market value gain 9% since the start of 2016. The firm’s revenue for the first quarter was $272.11 million, up by $51.6 million year-over-year. The increase was mainly driven by a decrease in voluntary waivers that were put in place for certain money market funds to maintain positive or zero net yields. Hence, the Federal Reserve’s decision to raise interest rates for the first time in nearly a decade is reflected in the financial performance of Federated Investors. Murray Stahl’s Horizon Asset Management reported owning nearly 277,000 shares of Federated Investors Inc. (NYSE:FII) through its 13F for the first quarter.
#4. Buckle Inc. (NYSE:BKE)
– Number of shares owned by Royce & Associates (as of March 31): 4.35 Million
– Value of Royce & Associates’ holding (as of March 31): $147.19 Million
The small-cap equity specialist also trimmed its position in Buckle Inc. (NYSE:BKE) during the first quarter, by 1.58 million shares. The remaining stake of 4.35 million shares owned on March 31 was worth $147.19 million and accounted for 0.93% of the fund’s equity portfolio. The retailer of casual apparel, footwear and accessories has not enjoyed a great stock performance since the beginning of 2015, as Buckle shares have lost well over half of their value. Just recently, the operator of 468 retail stores across 44 states in the United States said that comparable-store net sales decreased by 13.2% year-over-year in April. Research firm Retail Metrics had anticipated a same-store sales decline of just 6.6%, so things are looking rather bleak for the retailer at the moment. Eric Sportt’s Sprott Asset Management maintained ownership of 155,000 shares of Buckle Inc. (NYSE:BKE) throughout the March quarter.
We’ll check out Royce & Associates’ favorite three stocks on the next page.