Well, we continue to see new ideas in a variety of sectors – the healthcare area, which has done particularly well in the market as well as for us has been a good place to find new ideas. I would say that business services is another area.
One of the bigger themes that we have going right now is in our growth restaurant and retailer theme. As many of us know, the economy, the backdrop for consumer spending has improved.
We have seen lower unemployment, which more people with jobs is good for spending. They have greater confidence to go out and spend money. Lower energy and fuel prices have been a big tailwind, in my opinion, and so I think, even though the consumer is saving more money, he is also spending more.
So one of our favorites happens to be the Container Store (TCS, Financial), which is a growth retailer. It has had a bit of a rocky start since it came public about a year and a half ago but it reminds me a lot of those long term runway companies.
The Container Store has 72 stores and they believe they can hit the 500 store mark just in the US alone, so that is 18 years of runway if they are growing their store count at about 12% a year. In addition, they have some other big growth strategies that are underway right now and will be completely rolled out throughout their chain by the end of the year.
So even though the market seems to be bearish on it right now, there is a lot of negativism because of some weather and some sort of short term issues, I think this is a unique product. The consumers love this product. The employees are happy. They get paid more than the average retail employee and they are selling a unique product.
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Chip Skinner is a Portfolio Manager of Royce & Associates, LLC, investment adviser to The Royce Funds, and serves as portfolio manager for Royce Smaller-Companies Growth Fund. The thoughts and opinions expressed in the video are solely those of the person speaking as of September 28, 2015 and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.
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