Royce Investment Partners revealed last week it made some changes to its portfolio as it prepared to head into a new year.
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 made changes to 13 holdings on Dec. 31. The most notable trades included increased bets on Avid Technology Inc. (AVID, Financial), Amtech Systems Inc. (ASYS, Financial) and Chicken Soup for the Soul Entertainment Inc. (CSSE, Financial) as well as reductions to the Circor International Inc. (CIR, Financial) and CyberOptics Corp. (CYBE, Financial) positions.
Avid Technology
After boosting its Avid Technology (AVID, Financial) position in the third quarter, the firm upped it by 13.05%, buying 271,848 shares. The trade had an impact of 0.7% on the equity portfolio. The stock traded for an average price of $32.57 per share on the day of the transaction.
Royce’s firm now holds 2.4 million shares, representing 0.57% of the equity portfolio. GuruFocus estimates the firm has gained 23.94% on the long-held investment.
The Burlington, Massachusetts-based company, which develops software and hardware for digital media production and development, has a $1.47 billion market cap; its shares closed at $32.72 on Friday with a price-earnings ratio of 44.82 and a price-sales ratio of 3.83.
The GF Value Line suggests the stock is significantly overvalued currently based on historical ratios, past performance and future earnings projections.
GuruFocus rated Avid’s financial strength 3 out of 10 on the back of low interest coverage and an Altman Z-Score of -1.87 that warns the company could be at risk of going bankrupt. The return on invested capital also overshadows the weighted average cost of capital, indicating value is being created as the company grows.
The company’s profitability fared better with a 6 out of 10 rating. In addition to operating margin expansion, Avid is supported by strong returns on equity, assets and capital that outperform a majority of competitors. It also has a high Piotroski F-Score of 7 out of 9, meaning business conditions are healthy. Although revenue per share has declined in recent years, the company still has a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Avid, Royce’s firm has the largest stake with 5.23% of its outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Jeremy Grantham (Trades, Portfolio) also have positions in the stock.
Amtech Systems
With an impact of 0.03% on the equity portfolio, the firm upped its Amtech Systems (ASYS, Financial) stake by 47.51%, buying 387,739 shares. Shares traded for an average price of $9.88 each on the day of the transaction.
The firm now holds 1.2 million shares total, accounting for 0.09% of the equity portfolio. GuruFocus data shows it has lost 15.97% on the investment over its lifetime.
The company, which is headquartered in Tempe, Arizona, is a supplier of semiconductor equipment and consumables to the power semiconductor industry. Amtech has a market cap of $134.94 million; its shares closed at $9.43 on Friday with a price-earnings ratio of 85.73, a price-book ratio of 1.58 and a price-sales ratio of 1.58.
According to the GF Value Line, the stock is significantly overvalued currently.
Amtech’s financial strength was rated 7 out of 10 by GuruFocus. In addition to adequate interest coverage, the Altman Z-Score of 3.61 indicates the company is in good standing. The ROIC is also eclipsed by the WACC, meaning the company is struggling to create value.
The company’s profitability did not fare as well, scoring a 3 out of 10 rating on the back of margins and returns that underperform over half of its industry peers. Amtech is supported by a moderate Piotroski F-Score of 4, however, which means operations are typical for a stable company. It also has a one-star predictability rank even though revenue per share has declined in recent years.
With an 8.41% stake, Royce’s firm is the company’s largest guru shareholder. Simons’ firm and First Eagle Investment (Trades, Portfolio) also own shares of Amtech.
Chicken Soup for the Soul Entertainment
Impacting the equity portfolio by 0.01%, Royce’s firm increased is holding in Chicken Soup for the Soul Entertainment (CSSE, Financial) by 17.56%, buying 79,285 shares. The stock traded for an average per-share price of $13.84 during the quarter.
Royce Investment Partners now holds 530,863 shares total, making up 0.05% of the equity portfolio. GuruFocus data shows the firm has gained an estimated 51.81% on the investment so far.
The Connecticut-based company, which operates subscription-based, online video-on-demand networks that cover themes like family, relationships and faith, among others, has a $222.34 million market cap; its shares closed at $13.54 on Friday with a price-book ratio of 1.79 and a price-sales ratio of 2.03.
Based on the GF Value Line, the stock appears to be a potential value trap currently, so investors should do thorough research before making a decision.
GuruFocus rated Chicken Soup for the Soul’s financial strength 4 out of 10. As a result of issuing approximately $23.05 million in new long-term debt over the past three years, it has poor interest coverage. The low Altman Z-Score of 0.43 also warns the company could be at risk of going bankrupt since it has recorded an operating income loss in the past several years.
The company’s profitability fared even worse with a 2 out of 10 rating due to negative margins and returns that underperform a majority of competitors. It has a moderate Piotroski F-Score of 5, however.
Royce Investment Partners holds 3.23% of Chicken Soup for the Soul Entertainment’s outstanding shares.
Circor International
Following a small reduction in the third quarter, the firm further reduced its stake in Circor International (CIR, Financial) by 8.25%, selling 128,154 shares. The trade had an impact of 0.03% on the equity portfolio. The stock traded for an average price of $27.18 per share on the day of the transaction.
Royce’s firm now holds 1.4 million shares total, giving it 0.29% space in the equity portfolio. GuruFocus data shows it has lost approximately 22.28% on the investment so far.
Headquartered in Burlington, Massachusetts, the company, which manufactures flow and motion control products, has a market cap of $497.94 million; its shares closed $24.58 on Friday with a price-book ratio of 2.7 and a price-sales ratio of 0.64.
The GF Value Line suggests the stock is modestly undervalued currently.
Circor’s financial strength was rated 3 out of 10 by GuruFocus. In addition to weak interest coverage, the company’s Altman Z-Score of 1.23 warns that it could be in danger of going bankrupt since assets are building up at a faster rate than revenue is growing and the Sloan ratio is indicative of poor earnings quality. The WACC also exceeds the ROIC, so it is struggling to create value.
The company’s profitability scored a 6 out of 10 rating. In addition to a declining operating margin, Circor’s returns are negative and underperform a majority of industry peers. It also has a moderate Piotroski F-Score of 5 and, despite recording a decline in revenue per share, a one-star predictability rank.
Of the gurus invested in Circor, Royce’s firm has the largest stake with 7.03% of outstanding shares. Other top guru shareholders are Mario Gabelli (Trades, Portfolio), Keeley-Teton Advisors LLC, First Eagle and Barrow, Hanley, Mewhinney & Strauss.
CyberOptics
Royce Investment Partners trimmed its position in CyberOptics (CYBE, Financial) by 3.8%, selling 16,300 shares. The trade had an impact of 0.1% on the equity portfolio. Shares traded for an average price of $46.50 each on the day of the transaction.
The firm now holds 412,400 shares, representing 0.14% of the equity portfolio. GuruFocus estimates the firm has gained 34.24% on the investment.
The Minneapolis-based company, which manufactures high-precision 3-D sensing technology solutions, has a $307.32 million market cap; its shares closed at $41.78 on Friday with a price-earnings ratio of 29.22, a price-book ratio of 4.08 and a price-sales ratio of 3.59.
According to the GF Value Line, the stock is modestly overvalued currently.
GuruFocus rated CyberOptics’ financial strength 6 out of 10. In addition to sufficient interest coverage, the company has a robust Altman Z-Score of 12.01 that indicates it is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also surpasses the WACC, meaning value creation is occurring.
The company’s profitability scored a 5 out of 10 rating, driven by expanding margins and returns that outperform a majority of competitors. CyberOptics also has a high Piotroski F-Score of 7 and a one-star predictability rank.
With 5.6% of outstanding shares, Royce’s firm is CyberOptics’ largest guru shareholder. Mairs and Power (Trades, Portfolio) and Simons’ firm also own the stock.
Portfolio composition and performance
Other positions the firm made adjustments to were Faro Technologies Corp. (FARO, Financial), Forrester Research Inc. (FORR, Financial), AstroNova Inc. (ALOT, Financial), CPI Aerostructures Inc. (CVU, Financial), Century Casinos Inc. (CNTY, Financial), Computer Task Group Inc. (CTG, Financial), The Dixie Group Inc. (DXYN, Financial) and Flexsteel Industries Inc. (FLXS, Financial).
Over half of Royce Investment Partners’ $13.37 billion equity portfolio, which was composed of 984 stocks as of the end of the third quarter, was invested in the industrials, technology and financial services sectors, followed by a smaller exposure to the consumer cyclical space.
According to the firm’s website, the Royce Premier Fund returned 16.36% in 2021, underperforming the S&P 500 Index’s 28.7% total return.
