Chuck Royce’s Top Stock Picks Include Nu Skin Enterprises, Inc. (NUS)

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Royce and his team reported owning 7.5 million shares of $2.6 billion market cap apparel retailer The Buckle, Inc. (NYSE:BKE). Buckle is a popular short target, with 26% of its float held short. The valuation doesn’t seem to be particularly high- the trailing and forward earnings multiples are 16 and 15 respectively- but at that pricing there would have to be at least some earnings growth in order to make it a good value. There’s been little change in the company’s financials relative to their levels a year ago, however, and so there may be better buys among apparel retailers.

Rounding out our list of Royce’s top five picks is Federated Investors Inc (NYSE:FII). The $3 billion market cap asset management company is valued at 16 times earnings, whether we consider its trailing results or consensus forecasts for 2014. This suggests that analysts consider the company’s growth prospects to be limited, and in fact sales and net income each changed by less than 2% in its most recent quarter compared to the same period in the previous year. Federated Investors is another popular short target; short sellers are responsible for 18% of the float.

We don’t see why shorts are so excited about Federated Investors or Buckle, but we wouldn’t but those stocks either given their stagnant performance. The same goes for Lincoln and Reliance, where recent results have been too weak for us to consider them as potential value plays. Nu Skin Enterprises, Inc. (NYSE:NUS) certainly has a number of risks related to its business model, and so we would certainly hesitate there as well, but it has been growing its earnings and if it could continue to do so for the next several years and hit analyst targets it could certainly justify the current valuation.

Disclosure: I own no shares of any stocks mentioned in this article.

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