Royce Investment Partners revealed earlier this week it reduced one position, added to another and sold out of a holding in May.
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 curbed its holding of International Money Express Inc. (IMXI, Financial), boosted its GCM Grosvenor Inc. (GCMG, Financial) stake and divested of its Ra Medical Systems Inc. (RMED, Financial) investment on May 31.
International Money Express
After reducing the International Money Express (IMXI, Financial) position by 29.81% in the first quarter, the firm slashed it another 96.09%, selling 2.7 million shares. The trade had an impact of -0.28% on the equity portfolio. The stock traded for an average price of $15.27 per share on the day of the transaction.
Royce’s firm now holds 110,300 shares total, which represent 0.01% of the equity portfolio. GuruFocus estimates the firm has gained 4.29% on the investment so far.
The Miami-based company, which provides money transfer services between the U.S. and Latin American countries, has a $606.33 million market cap; its shares were trading around $15.49 on Tuesday with a price-earnings ratio of 16.03, a price-book ratio of 5.62 and a price-sales ratio of 1.59.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overvalued.
International Money Express’ financial strength and profitability were both rated 6 out of 10. In addition to adequate interest coverage, the company is supported by a robust Altman Z-Score of 4.7. The return on invested capital also significantly surpasses the weighted average cost of capital, indicating value is being created while the company grows.
The company is also supported by an expanding operating margin, strong returns on equity, assets and capital that outperform a majority of competitors and a moderate Piotroski F-Score of 5, which suggests business conditions are stable.
Royce’s firm has the largest holding in International Money Express with 0.28% of its outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Ruane Cunniff (Trades, Portfolio) also own the stock.
With an impact of 0.03% on the equity portfolio, the firm boosted its GCM Grosvenor (GCMG, Financial) stake by 6.16%, buying 311,649 shares. Shares traded for an average price of $11.95 each on the day of the transaction.
The firm now holds 5.37 million shares total, accounting for 0.43% of the equity portfolio. GuruFocus data shows it has lost an estimated 9.94% on the investment since the fourth quarter of 2020.
The alternative asset management company, which is headquartered in Chicago, has a market cap of $2.01 billion; its shares were trading around $10.84 on Tuesday with a price-sales ratio of 4.61.
According to the price chart, the stock has remained relatively flat since its initial public offering in November 2020.
GCM Grosvenor’s financial strength and profitability were both rated 3 out of 10. In addition to weak debt ratios, the company’s Altman Z-Score of 2.46 indicates it is under some pressure.
The company is also being weighed down by negative margins and returns that underperform a majority of industry peers.
Ra Medical Systems
Impacting the equity portfolio by -0.01%, Royce’s firm eliminated its holding of Ra Medical Systems (RMED, Financial), selling 317,583 shares. The stock traded for an average per-share price of $3.25 the day of the transaction.
Since establishing the position in the second quarter of 2019, GuruFocus says Royce Investment Partners gained an estimated 36.89% on the investment.
The Carlsbad, California-based medical device company, which manufactures advanced excimer laser systems to treat vascular and dermatological diseases, has a $38.03 million market cap; its shares were trading around $7.78 on Tuesday with a price-book ratio of 1.62 and a price-sales ratio of 3.56.
Based on the median price-sales chart, the stock appears to be overvalued.
GuruFocus rated Ra Medical’s financial strength 3 out of 10. The Altman Z-Score of -9.93 warns the company could be in danger of going bankrupt if it does not improve its liquidity position. The Sloan ratio is also indicative of poor earnings quality.
The company’s profitability fared even worse, scoring a 1 out of 10 rating on the back of negative margins and returns that underperform a majority of competitors. Ra Medical also has a low Piotroski F-Score of 2, which indicates operating conditions are in poor shape. It has also recorded a decline in revenue per share over the past five years.
Simons’ firm holds 4.77% of the company’s outstanding shares.
Portfolio composition and performance
Nearly half of Royce Investment Partners’ $14.88 billion equity portfolio, which was composed of 1,012 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 11.5% in 2020, underperforming both the S&P 500 Index’s return of 18.4% and the Russell 2000’s 20% return.