The kind of well-run, fundamentally solid, and profitable companies that we typically seek for the portfolio of Royce Premier Fund have not been consistent market leaders over the last several years. But you wouldn’t know that by looking at the Fund’s first-half results. For the year-to-date period ended June 30, 2014, the Fund increased 7.3%, more than doubling the 3.2% gain of its small-cap benchmark, the Russell 2000 Index, over the same period. We refer to stocks with the characteristics listed above as quality companies, and they have been performing better by fits and starts dating back to the spring of 2012. Most rallies over that same period, however, have generally been better for lower-quality, faster-growing stocks or those with high yields. That held true for the small-cap market through 2014’s first six months, though the Fund’s first-quarter advantage and, more important, its strong showing through the year’s only correction allowed it to cruise past its benchmark.
The first quarter saw an extension of the bull run that made 2013 such a terrific year for equities in general, though the pace was much slower. The Fund beat the small-cap index in the year’s opening quarter, up 1.8% compared to a 1.1% gain for the benchmark. The Russell 2000 reached its year-to-date high on March 4, falling 9.1% through May 15. This made April a bearish month for the index, but the Fund escaped 2014’s cruelest month with a small gain. When small-caps began to reverse course in mid-May, Premier continued to advance. Although it slightly trailed the index in May and June, the Fund easily outpaced the Russell 2000 in the second quarter, gaining 5.5% versus 2.0% for the benchmark. Continue Reading »