The Royce International Premier Fund (Trades, Portfolio) disclosed its first-quarter portfolio last week.
The fund, which is part of Chuck Royce (Trades, Portfolio)'s Royce Investment Partners, is managed by Mark Rayner. When picking stocks, the portfolio manager focuses on a concentrated number of "premier" small-cap companies outside the U.S. that have discernible competitive advantages, high returns on invested capital and sustainable, moat-like franchises. He also seeks to identify companies that have notable strengths in industry structure, operational efficiency, financial standing and corporate governance.
In alignment with these criteria, the International Premier Fund established three new positions during the quarter, sold out of three holdings and added to or reduced a number of other existing investments. Notable trades for the three months ended March 31 included new stakes in Learning Technologies Group PLC (LSE:LTG, Financial), NICE Information Service Co. Ltd. (XKRX:030190, Financial) and discoverIE Group PLC (LSE:DSCV, Financial). It also divested of its holdings in TGS-NOPEC Geophysical Co. ASA (OSL:TFS, Financial) and Bossard Holding AG (XSWX:BOSN, Financial).
Learning Technologies Group
The fund invested in 6.05 million shares of Learning Technologies Group (LSE:LTG, Financial), allocating 1.15% of the equity portfolio to the stake. The stock traded for an average price of 1.67 pounds ($2.34) per share during the quarter.
The London-based software company, which offers a wide range of e-learning services and technologies to corporate and government clients, has a market cap of 1.25 billion pounds; its shares closed at 1.69 pounds on Friday with a price-earnings ratio of 70.38, a price-book ratio of 4.64 and a price-sales ratio of 9.33.
The GF Value Line suggests the stock is fairly valued currently based on historical ratios, past performance and future earnings projections.
GuruFocus rated Learning Technologies' financial strength 7 out of 10. Although the company has issued approximately 3.43 million pounds in new long-term debt over the past three years, it is still at a manageable level due to adequate interest coverage. The Altman Z-Score of 6.2 indicates the company is in good standing even though assets have been building up at a faster rate than revenue is growing. The return on invested capital is also being eclipsed by the weighted average cost of capital, indicating issues with creating value.
The company's profitability also fared well with a 6 out of 10 rating, driven by an expanding operating margin, strong returns that outperform over half of its competitors and a moderate Piotroski F-Score of 6, which suggests business conditions are stable. Learning Technologies has also recorded a decline in revenue per share over the past 12 months.
The fund holds 0.82% of Learning Technologies' outstanding shares.
NICE Information Service
The International Premier Fund picked up 541,461 shares of NICE Information Service (XKRX:030190, Financial), dedicating 1.11% of the equity portfolio to the position. During the quarter, shares traded for an average price of 22,964.2 won ($20.59) each.
The South Korean financial services company, which provides credit information services, has a market cap of 1.46 trillion won; its shares closed at 24,350 won on Friday with a price-earnings ratio of 30.85, a price-book ratio of 5.63 and a price-sales ratio of 3.28.
According to the GF Value Line, the stock is significantly overvalued currently.
The valuation rank of 2 out of 10 aligns with this assessment, especially since the share price and price-sales ratio are approaching 10-year highs.
NICE Information Service's financial strength and profitability were both rated 8 out of 10 by GuruFocus. Boosted by a comfortable level of interest coverage, the robust Altman Z-Score of 10.67 indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing.
The company is also supported by an expanding operating margin, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 5. NICE also has consistent earnings and revenue growth, contributing to its predictability rank of two out of five stars. GuruFocus says companies with this rank return an average of 6% annually over a 10-year period.
Of the gurus invested in NICE Information, the Wasatch International Growth (Trades, Portfolio) Fund has the largest holding with 1.2% of outstanding shares. Royce holds 0.91%.
DiscoverIE Group
The fund established a 1.2 million-share stake in discoverIE Group (LSE:DSCV, Financial), giving it 1.02% space in the equity portfolio. The stock traded for an average per-share price of 6.87 pounds during the quarter.
Headquartered in the U.K., the company, which manufactures customer-specific electronic components and solutions, has a market cap of 661.97 million pounds; its shares closed at 7.40 pounds on Friday with a price-earnings ratio of 56.06, a price-book ratio of 3.2 and a price-sales ratio of 1.5.
Based on the GF Value Line, the stock appears to be significantly overvalued currently.
The valuation rank of 2 out of 10 supports this assessment since the share price and price ratio s are all closing in on multiyear highs.
GuruFocus rated discoverIE's financial strength as well as its profitability 6 out of 10. Due to issuing approximately 45.5 million pounds in new long-term debt over the past three years, the company has weak interest coverage. The Altman Z-Score of 3.34, however, indicates it is in good standing even though assets are building up at a faster rate than revenue is growing.
The company has an expanding operating margin as well as strong returns that outperform over half of its competitors. DiscoverIE also has a moderate Piotroski F-Score of 5, but the one-star predictability rank is on watch as a result of revenue per share declining over the past year. According to GuruFocus, companies with this rank return an average of 1.1% annually.
The fund holds 1.34% of discoverIE's outstanding shares.
TGS-NOPEC Geophysical
The International Premier Fund dumped all 1.1 million shares of TGS-NOPEC Geophysical (OSL:TGS), impacting the equity portfolio by -1.57%. The stock traded for an average price of 134.88 krone ($16.23) per share during the quarter.
GuruFocus estimates the fund lost 37.81% on the investment, which was established in the first quarter of 2019.
The Norwegian company, which provides geoscientific data products and services to the oil and gas industry, has a market cap of 14.63 billion krone; its shares closed at 125 krone on Friday with a forward price-earnings ratio of 55.25, a price-book ratio of 1.27 and a price-sales ratio of 4.05.
The GF Value Line suggests the stock is currently modestly undervalued.
The valuation rank of 7 out of 10 also leans toward undervaluation.
TGS-NOPEC Geophysical's financial strength was rated 6 out of 10 by GuruFocus. Although it has debt ratios that are outperforming versus other industry players, the Altman Z-Score of 1.44 warns the company could be at risk of going bankrupt.
The company's profitability fared a bit better, scoring a 7 out of 10 rating even though margins and returns are negative and underperforming a majority of industry peers. The low Piotroski F-Score of 2 also indicates operating conditions are in poor shape. As a result of revenue per share declining over the past five years, the one-star predictability rank is on watch.
The Invesco European Growth Fund (Trades, Portfolio) holds 0.85% of the company's outstanding shares.
Bossard Holding
After reducing its Bossard Holding (XSWX:BOSN, Financial) position over several quarters, the fund sold its 76,540 remaining shares, impacting the equity portfolio by -1.44%. Shares traded for an average price of 202.42 Swiss francs ($221.16) each during the quarter.
GuruFocus data shows the International Premier Fund gained an estimated 34.11% on the investment.
The Swiss industrial distribution company, which provides screws, fasteners and logistics services, has a market cap of 1.78 billion francs; its shares closed at 232 francs on Friday with a price-earnings ratio of 18.04, a price-book ratio of 5.58 and a price-sales ratio of 2.19.
According to the GF Value Line, the stock is significantly overvalued.
The valuation rank of 2 out of 10 supports this analysis as the share price and price-sales ratio are both closing in on multiyear highs.
GuruFocus rated Bossard's financial strength 6 out of 10. Although the company has issued approximately 52.5 million Swiss francs in new long-term debt over the past three years, it is still at a manageable level due to adequate interest coverage. The high Altman Z-Score of 6.05 also indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also surpasses the WACC, indicating good value creation.
The company's profitability fared even better with an 8 out of 10 rating, driven by strong margins and returns that outperform a majority of competitors. Bossard also has a moderate Piotroski F-Score of 4, but the four-star predictability rank is on watch due to a decline in revenue per share over the past year. GuruFocus data shows companies with this rank return, on average, 9.8% annually.
No other gurus currently own the stock.
Additional trades and portfolio performance
During the quarter, the International Premier Fund also boosted its New Work SE (XTER:NOW) and OBIC Business Consultants Co. Ltd. (TSE:4733) holdings and sold out of Cosel Co. Ltd. (TSE:6905).
The fund's $1.09 billion equity portfolio, which is composed of 61 stocks, is most heavily invested in the industrials and technology sectors.
GuruFocus data shows the International Premier Fund returned 15.74% in 2020, slightly underperforming the S&P 500's return of 18.4%.
Disclosure: No positions.
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