Royce Investment Partners recently released its portfolio updates for the first quarter of 2021, which ended on March 31.
Renamed from Royce & Associates at the end of 2019, Royce Investment Partners is the firm founded by Chuck Royce (Trades, Portfolio) in 1972. The firm specializes in small-cap companies, which it chooses through a bottom-up, risk-conscious approach. The portfolio managers focus on quality and deep value through a variety of open-end and closed-end funds.
Based on the above-listed criteria, the firm's top buys for the quarter were SEI Investments Co. (SEIC, Financial) and UFP Industries Inc. (UFPI, Financial), while its biggest sells were Coherent Inc. (COHR, Financial) and FLIR Systems Inc. (FLIR, Financial).
SEI Investments
The firm increased its holding in SEI Investments (SEIC, Financial) by 818,919 shares, or 185.52%, for a total holding of 1,260,338 shares. The trade had a 0.34% impact on the equity portfolio. During the quarter, shares traded for an average price of $58.58.
SEI Investments is a financial services company that provides investment processing, investment management and investment operations solutions to wealth management clients around the world. It is headquartered in Oaks, Pennsylvania.
On May 11, shares of SEI Investments traded around $62.06 for a market cap of $8.89 billion and a price-earnings ratio of 19.57. According to the GuruFocus Value chart, the stock is fairly valued.
The company has a financial strength rating of 8 out of 10 and a profitability rating of 9 out of 10. The Altman Z-Score of 19.63 and Piotroski F-Score of 7 out of 9 indicate a fortress-like balance sheet. The three-year revenue growth rate of the company is 6.3%, while the three-year Ebitda growth rate is 3.9%.
UFP Industries
The firm added 578,738 shares, or 158.76%, to its position in UFP Industries (UFPI, Financial) for a total stake of 943,281 shares. The trade had a 0.29% impact on the equity portfolio. Shares traded for an average price of $62.59 during the quarter.
UFP, or Universal Forest Products Industries, is an American manufacturer of wood and wood-alternative products, pressure-treated wood and engineered roof systems for site-built construction and manufactured housing.
On May 11, shares of UFP Industries traded around $84.23 for a market cap of $5.23 billion and a price-earnings ratio of 16.86. According to the Peter Lynch chart, the stock is trading in line with its intrinsic value and below its median historical valuation.
The company has a financial strength rating of 7 out of 10 and a profitability rating of 8 out of 10. Although the cash-debt ratio of 0.13 is lower than 68% of industry peers, the interest coverage ratio of 41.07 means it has debt well-covered. The return on invested capital has been higher than the weighted average cost of capital in recent years, indicating growth has been profitable.
Coherent
The firm reduced its investment in Coherent (COHR, Financial) by 416,811 shares, or 98.65%, for a remaining holding worth 5,725 shares. The trade had a -0.51% impact on the equity portfolio. During the quarter, shares traded for an average price of $222.62.
Coherent manufactures and supports laser equipment and components. Based in Santa Clara, California, the company is a leading global provider of industrial and fiber laser solutions with more than 50 years of experience.
On May 11, shares of Coherent traded around $259.53 for a market cap of $6.38. According to the GF Value chart, the stock is significantly overvalued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10. The interest coverage ratio of 1.56 indicates the company may have trouble making interest payments on its debt, though the Altman Z-Score of 5.22 seems to show that the risk of bankruptcy is low. ROIC has dropped below WACC, indicating the company's operations are not currently profitable.
FLIR Systems
The firm sold out of its 1,131,638- share stake in FLIR Systems (FLIR, Financial), which had a -0.41% impact on the equity portfolio. Shares traded for an average price of $54.34 during the quarter.
Headquartered in Wilsonville, Oregon, FLIR Systems is a global leader in the designing and manufacturing of thermal imaging infrared cameras, components and sensors. Its products are used for defense, industrial and commercial applications.
On May 11, shares of FLIR Systems traded around $58.36 for a market cap of $7.71 billion and a price-earnings ratio of 32.64. According to the Peter Lynch chart, the stock is trading above both its intrinsic value and its median historical valuation.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 0.38 is below the industry median of 1.41, but the Piotroski F-Score of 7 out of 9 suggests a healthy financial situation. The operating margin of 18.08% and net margin of 11.05% are outperforming 84% of industry peers but have been in a slow decline over the past decade.
Portfolio overview
As of the quarter's end, the firm's equity portfolio consisted of 1,012 stocks valued at a total of $14.88 billion. The top holdings were MKS Instruments Inc. (MKSI, Financial) with 1.11% of the equity portfolio, Kulicke & Soffa Industries Inc. (KLIC, Financial) with 1.04% and Huntsman Corp. (HUN, Financial) with 0.75%.
In terms of sector weighting, the firm was most invested in industrials, technology and financial services.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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