"The real goal is absolute returns."
"Our first job is to seek to protect principal and not lose money. The whole idea of indexes, and index comparisons, is a relatively recent phenomenon—one that I don't absolutely share as the primary goal. The real goal is absolute returns, perhaps on a risk-adjusted basis, but absolute returns are the goal."
I recently had the opportunity to sit down with Tom Gardner, co-founder of The Motley Fool. I think his questions really helped to highlight the essence of how we invest.
Tom and I had a lot of fun talking about our investment principles, what attracts us to companies, and why risk management is so critical to all that we do here at Royce.
We also discussed the ways in which we seek to take advantage of volatility and the importance of seeking to protect principal—not losing money being as important to us as making money.
Because our own culture is so important to all of us, we also touched on some of the cultural factors that are important to our work.
Further delving into our stock selection process, we covered various risk and other factors that come into play when we’re looking closely at small-cap companies. We went over why balance sheets are so crucial to our process and some of the reasons we like dividends, which go beyond the income itself.
It was a great pleasure to talk with Tom and provide a window into our time-tested, disciplined investment approach.