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Sydnee Gatewood
Sydnee Gatewood
Articles (3500) 

Chuck Royce's Firm Sails Away With OneWater Marine

Small-cap specialist invests in newly public boat retailer

Royce Investment Partners revealed this week it established a new holding in February.

The New York-based firm, which was founded in 1972 by Chuck Royce (Trades, Portfolio), specializes in small-cap companies. The portfolio management team picks stocks based on an active, bottom-up, risk-conscious and fundamental approach. They also search for value opportunities among companies trading at a discount to enterprise value. The firm announced in December it changed its name from Royce Funds to better reflect its business and client base.

According to GuruFocus Real-Time Picks, a Premium feature, the firm disclosed a position in the newly public OneWater Marine Inc. (NASDAQ:ONEW) on Feb. 29. It also opened a new holding in health care company AAC Holdings Inc. (AACH), which is a penny stock, after selling out of it in fourth-quarter 2019.

OneWater Marine

The firm invested in 629,700 shares of OneWater Marine, allocating 0.09% of the equity portfolio to the holding. The stock traded for an average price of $16.01 per share.

The Buford, Georgia-based company, which is a recreational boat retailer, has a $154.53 million market cap and an enterprise value of $450.91 million; its shares were trading around $10.16 on Tuesday with a price-earnings ratio of 3.54 and a price-book ratio of 5.26.

The price chart shows the stock has declined nearly 40% since its initial public offering in early February.


On Feb. 27, the company reported its first-quarter 2020 financial results. While OneWater’s revenue grew 49% from the prior-year quarter to $153.7 million, it recorded a net loss of $1.1 million. Same-store sales increased 17% and sales of pre-owned boats climbed 90% to $37.8 million.


In a statement, CEO Austin Singleton said sales were driven by “positive consumer sentiment and favorable retail boat trends.”

“Feedback from the start of the 2020 boat season suggests continued momentum and optimism across our network,” he added.

For the full fiscal year, OneWater anticipates low double-digit growth in same-store sales and adjusted earnings before interest, taxes, depreciation and amortization in the range of $56 million to $58 million.

GuruFocus rated OneWater Marine’s financial strength 3 out of 10 on the back of low interest coverage and a buildup in inventory, indicating it may be having trouble selling its goods. The company’s profitability did not fare much better, scoring a 4 out of 10 rating. It is supported, however, by margins and returns that outperform over 60% of its competitors.

Royce’s firm holds 4.33% of One Water’s outstanding shares.

Portfolio composition and performance

Over 40% of Royce Investment Partners’ $ 11.20 billion equity portfolio, which is composed of 1,136 stocks, is invested in the industrials and technology sectors as of the end of the fourth quarter, followed by smaller holdings in the financial services and consumer cyclical spaces.


Other companies the firm currently owns in the vehicles and parts industry include BorgWarner Inc. (NYSE:BWA), Shiloh Industries Inc. (SHLO), Lydall Inc. (NYSE:LDL), Garrett Motion Inc. (GTX), Cooper Tire & Rubber Co. (NYSE:CTB), Camping World Holdings Inc. (NYSE:CWH), Commercial Vehicle Group Inc. (NASDAQ:CVGI) and MasterCraft Boat Holdings Inc. (NASDAQ:MCFT).

According to the firm’s website, the Royce Premier Fund returned 34.13% in 2019, outperforming both the S&P 500 Index’s return of 31.49% and the Russell 2000’s 25.52% return.

Disclosure: No positions.

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