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James Li
James Li
Articles (1531) 

Top 4 4th-Quarter Trades of Chuck Royce's Firm

Small-cap-oriented firm releases quarterly portfolio

Royce Investment Partners, the firm founded by Chuck Royce (Trades, Portfolio), disclosed this week that the firm's top four trades included a new position in GCM Grosvenor Inc. (NASDAQ:GCMG), a position boost in Ralph Lauren Corp. (NYSE:RL) and reductions in SEACOR Holdings Inc. (NYSE:CKH) and Trupanion Inc. (NASDAQ:TRUP).

The New York-based firm invests primarily in stocks with a market cap between $5 billion and $10 billion and a share price below the firm's estimate of a company's enterprise value.

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Royce said in its 2020 shareholder letter that while the small-cap Russell 2000 index started the year with a significant tumble, the index rebounded during the final nine months of the year, closing on Dec. 31 at 1,974.86.

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As of December 2020, the firm's $12.10 billion equity portfolio contains 996 stocks, with a turnover ratio of 11%. The top four sectors in terms of weight are industrials, technology, financial services and consumer cyclical.

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GCM Grosvenor

The firm purchased 4,191,635 shares of GCM Grosvenor (NASDAQ:GCMG), giving the stake 0.46% weight in the equity portfolio. Shares averaged $11.95 during the fourth quarter of 2020.

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The Chicago-based asset management company invests on behalf of clients seeking allocations to alternative investments, which include private equity, infrastructure, real estate and credit. The company closed on Nov. 17 its business combination with blank-check company CF Finance Acquisition Corp. (NASDAQ:CFFA).

Ralph Lauren

The firm purchased 442,622 shares of Ralph Lauren (NYSE:RL), increasing the position 255.9% and the equity portfolio 0.38%. Shares averaged $84.12 during the fourth quarter of 2020; the stock is modestly overvalued based on Tuesday's price-to-GF Value ratio of 1.30.

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The New York-based company designs and manufactures apparel, footwear and eyewear products through brands like Polo Ralph Lauren, Lauren Ralph Lauren and Chaps. GuruFocus ranks the company's profitability 6 out of 10: The company's three-year earnings growth rate of over 40% outperforms over 90% of global competitors even though profit margins and returns are underperforming over 60% of global apparel manufacturing companies.

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Other gurus with holdings in Ralph Lauren include Jim Simons (Trades, Portfolio)' Renaissance Technologies and Yacktman Asset Management (Trades, Portfolio).

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SEACOR

The firm sold 943,335 shares of SEACOR (NYSE:CKH), trimming the position approximately 70% and the equity portfolio 0.42%. Shares averaged $41.45 during the fourth quarter of 2020.

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GuruFocus ranks the Fort Lauderdale, Florida-based company's profitability 5 out of 10: Although the company's return on assets outperforms over 65% of global competitors, operating margins are outperforming just 55% of global energy companies.

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Trupanion

The firm sold 330,332 shares of Trupanion (NASDAQ:TRUP), reducing the position 84.93%. Shares averaged $94.67 during the fourth quarter.

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The Seattle-based company sells insurance products for pets, primarily cats and dogs. GuruFocus ranks the company's financial strength 6 out of 10 on the back of a strong Altman Z-score, which is offset by debt ratios that outperform just over half of global competitors.

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Disclosure: No positions.

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