Royce Investment Partners revealed this week it added to two positions in July.
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.
According to Real-Time Picks, a Premium GuruFocus feature, the firm boosted its position in PCTEL Inc. (PCTI, Financial) by 49.84% and its Chicken Soup for the Soul Entertainment Inc. (CSSE, Financial) holding by 33.15% on July 31.
PCTEL
The firm picked up 329,967 shares of the Bloomingdale, Illinois-based company, impacting the equity portfolio by 0.03%. The stock was trading around $6.55 per share on the day of the transaction.
Royce Investment Partners now owns 992,067 shares total, representing 0.09% of the equity portfolio. GuruFocus estimates the firm has lost 1.16% on the investment since establishing the position.
The telecom equipment provider has a $119.66 million market cap and an enterprise value of $85.85 million; its shares were trading around $6.33 on Friday with a price-earnings ratio of 36.72, a price-book ratio of 1.77 and a price-sales ratio of 1.37.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated PCTEL’s financial strength 7 out of 10 on the back of comfortable interest coverage and a robust Altman Z-Score of 6.23. The return on invested capital is also well above the weighted average cost of capital, indicating it is able to turn a profit even though revenue per share has been in decline for the past five years.
The company’s profitability did not fare as well, scoring a 4 out of 10 rating. While the operating and net margins are in poor shape, its returns are outperforming at least half of its competitors. PCTEL also has a high Piotroski F-Score of 7, which implies business conditions are healthy, and a predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically return an average of 1.1% annually over a 10-year period.
Of the gurus invested in PCTEL, Jim Simons (Trades, Portfolio)’ Renaissance Technologies has the largest stake with 7.51% of outstanding shares. John Rogers (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) are also shareholders.
Chicken Soup for the Soul Entertainment
Royce’s firm invested in 114,200 shares of the Connecticut-based entertainment company, impacting the equity portfolio by 0.02%. On the day of the transaction, shares traded for an average price of $9.66 each.
The firm now owns 458,700 shares total, accounting for 0.06% of the equity portfolio. GuruFocus data shows Royce Investment Partners has gained approximately 1.84% on the investment.
The company, which operates subscription-based, online video-on-demand networks that cover themes like family, relationships and faith, among others, has a market cap of $114.71 million and an enterprise value of $163.5 million; its shares were trading around $9.02 on Friday with a price-book ratio of 2.51 and a price-sales ratio of 1.63.
According to the price chart, the stock is trading above both its median price-sales value and its median price-book ratio. GuruFocus also noted the share price is near a one-year high.
Chicken Soup for the Soul’s financial strength was rated 4 out of 10. As a result of issuing approximately $11.5 million in new long-term debt over the past three years, it has poor interest coverage. The low Altman Z-Score of 0.06 also warns the company could be at risk of going bankrupt since it has recorded an operating income loss for the past several years.
The company’s profitability fared even worse as a result of negative margins and returns that underperform a majority of industry peers. It also has a low Piotroski F-Score of 2, which implies business conditions are in poor shape.
The firm holds 3.63% of Chicken Soup’s outstanding shares.
Portfolio composition and performance
Nearly half of Royce Investment Partners’ $7.34 billion equity portfolio, which was composed of 1,149 stocks as of the end of the first quarter, was invested in the industrials and technology sectors, followed by smaller holdings in the financial services and consumer cyclical spaces.
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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