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- David Ricardo, British Economist (1772 – 1823)
David Ricardo was an early 19th-Century English economist who posited that wealth could be generated by overweighting that which is scarce and underweighting that which is abundant. As simple as it may sound, many investors do not adhere to this belief. Royce Portfolio Manager, George Wyper, however, is a fan of Ricardo's and keeps this advice in mind when applying his investment discipline. With 32 years of industry experience spent outside the realm of Royce & Associates, one could venture a guess that George Wyper's investment philosophy must overlap in some fashion with that found at the firm he joined in April of 2010. Indeed, as Chief Investment Officer at Fireman's Fund Insurance Company, co-head of Asset Management at Warburg Pincus and in running his own firm, Wyper Capital Management, George Wyper has consistently looked for stocks with low leverage, high returns on invested capital, and high recurring and growing free cash flows.
While Wyper adheres to the cornerstones of our value approach, Royce Focus Value Fund, which he co-manages with Co-CIO Whitney George, is one of the few Royce Funds that may invest across all market capitalizations. With an all-cap portfolio, the Fund has the potential to benefit from market reversions to the mean and rotations in leadership. This flexibility broadens the Fund's investment landscape such that Royce Focus Value Fund owns names such as Microsoft Corporation (MSFT), Exxon Mobil (XOM), Berkshire Hathaway (BRK.A)(BRK.B) and Apple (APPL).
Characteristic of Wyper's style is his demand that a company achieve high levels of free cash flow. George also scrutinizes whether the company utilizes that free cash in an efficient and beneficial manner. In addition, he looks for insight into what is known as a company's capital management strategy. He notes that chief executives can be terrific marketers or creators of new products, but he or she must also understand capital management well enough to grow the intrinsic value per share of a company. In other words, a chief executive officer must know how to deploy capital skillfully.
Generally speaking, there are three ways a chief executive can choose to deploy capital:
1. Grow the business (invest in a plant, pay down debt, make an acquisition, et al.)
2. Increase the company's dividend
3. Buy back company stock
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