Royce Investment Partners disclosed its equity trades for the first quarter of 2022 earlier this week.
Founded in 1972 by Chuck Royce (Trades, Portfolio), the New York-based firm 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.
While the firm said it established 77 new positions in its 13F report for the three months ended March 31, it also sold out of 84 stocks and boosted or trimmed a number of other existing investments. The most notable trades included an addition to the Ziff Davis Inc. (ZD, Financial) position and reduced bets on the CMC Materials Inc. (CCMP, Financial), MSC Industrial Direct Co. Inc. (MSM, Financial), Camtek Ltd. (CAMT, Financial) and The Mosaic Co. (MOS, Financial) holdings.
Investors should be aware that the 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but the reports can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Ziff Davis
Royce’s firm upped its position in Ziff Davis (ZD, Financial) by 234.29%, buying 611,378 shares. The transaction had an impact of 0.50% on the equity portfolio. The stock traded for an average price of $102.65 per share during the quarter.
The firm now holds 872,328 shares total, accounting for 0.72% of the equity portfolio. GuruFocus estimates it has gained 2.55% on the investment over its lifetime.
The New York-based digital media and internet company has a $3.98 billion market cap and an enterprise value of $4.34 billion; its shares were trading around $84.19 on Friday with a price-earnings ratio of 8.21, a price-book ratio of 2.04 and a price-sales ratio of 2.84.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past performance and future earnings projections.
GuruFocus rated Ziff Davis’ financial strength 6 out of 10. In addition to weak interest coverage, the Altman Z-Score of 2.93 indicates the company is under some pressure since assets are building up at a faster rate than revenue is growing. The return on invested capital is also being overshadowed by the weighted average cost of capital, meaning the company is struggling to create value while growing.
The company’s profitability scored a 9 out of 10 rating. Despite having a declining operating margin, it is supported by returns on equity, assets and capital that outperform a majority of competitors. Ziff Davis also has a high Piotroski F-Score of 8 out of 9, suggesting operations are healthy, and consistent earnings and revenue growth contributed to a predictability rank of three out of five stars. According to GuruFocus, companies with this rank return an average of 8.2% annually over a 10-year period.
Of the gurus invested in Ziff Davis, Royce’s firm now has the largest holding with 1.85% of its outstanding shares. Ken Fisher (Trades, Portfolio), John Hussman (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Keeley-Teton Advisors, LLC (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Baillie Gifford (Trades, Portfolio) also own the stock.
CMC Materials
With an impact of -0.33% on the equity portfolio, the firm curbed its holding of CMC Materials (CCMP, Financial) by 51.98%, selling 229,807 shares. Shares traded for an average price of $184.52 each during the quarter.
The firm now holds a total of 212,328 shares, which represent 0.33% of the equity portfolio. GuruFocus data shows Royce Investment Partners has gained an estimated 85.88% on the investment so far.
The supplier of critical materials to semiconductor manufacturers and pipeline operators, which is headquartered in Aurora, Illinois, has a market cap of $5.17 billion and an enterprise value of $5.87 billion; its shares were trading around $180.63 on Friday with a price-book ratio of 5.73 and a price-sales ratio of 4.29.
According to the GF Value Line, the stock is fairly valued currently.
CMC Materials’ financial strength was rated 5 out of 10 by GuruFocus. In addition to sufficient interest coverage, the Altman Z-Score of 3.49 indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also eclipses the WACC, meaning value is being created.
The company’s profitability fared better, scoring an 8 out of 10 rating even though margins are in decline and returns are underperforming over half of its industry peers. CMC Materials also has a moderate Piotroski F-Score of 4, indicating operations are typical for a stable company, but the one-star predictability rank is on watch. GuruFocus research found companies with this rank return, on average, 1.1% annually.
With a 0.74% stake, Royce’s firm is the largest guru shareholder. Other top guru investors of CMC Materials are Mairs and Power (Trades, Portfolio), Simons’ firm and Mario Gabelli (Trades, Portfolio).
MSC Industrial Direct
Impacting the equity portfolio by -0.25%, Royce’s firm slashed its MSC Industrial Direct (MSM, Financial) investment by 60.64%, selling 405,875 shares. During the quarter, the stock traded for an average per-share price of $81.03.
The firm now holds 263,450 shares total, making up 0.19% of the equity portfolio. GuruFocus found it has gained approximately 45% on the investment since it was established in the fourth quarter of 2019.
The Melville, New York-based industrial supply company has a $4.58 billion market cap and an enterprise value of $5.48 billion; its shares were trading around $81.93 on Friday with a price-earnings ratio of 15.5, a price-book ratio of 3.74 and a price-sales ratio of 1.34.
Based on the GF Value Line, the stock appears to be fairly valued currently.
MSC Industrial’s financial strength was rated 6 out of 10 by GuruFocus. Although the company has issued new long-term debt in recent years, it is manageable due to a comfortable level of interest coverage. The robust Altman Z-Score of 4.65 also indicates the company is in good standing, while value creation is occurring based on the ROIC exceeding the WACC.
The company’s profitability fared well with an 8 out of 10 rating. Although its margins are declining, returns top a majority of competitors. MSC Industrial is also supported by a high Piotroski F-Score of 7 and a one-star predictability rank.
Yacktman Asset Management (Trades, Portfolio) is the company’s largest guru shareholder with a 2.23% stake. Other guru investors include Richard Pzena (Trades, Portfolio), Steven Scruggs (Trades, Portfolio), Simons’ firm, Caxton Associates (Trades, Portfolio), Greenblatt and Steven Cohen (Trades, Portfolio).
Camtek
The firm cut its Camtek (CAMT, Financial) position by 70.38%, or 707,884 shares, impacting the equity portfolio by -0.25%. During the quarter, the stock traded for an average price of $35.33 per share.
Royce Investment Partners, which now holds 297,876 shares of the company, has gained an estimated 48.48% on the investment so far based on GuruFocus data. The holding represents 0.08% of the equity portfolio.
The Israeli company, which develops and manufactures high-end inspection and metrology equipment for the semiconductor industry, has a market cap of $1.30 billion and an enterprise value of $1.10 billion; its shares were trading around $29.18 on Friday with a price-earnings ratio of 22.07, a price-book 4.43 and a price-sales ratio of 4.96.
The GF Value Line suggests the stock is fairly valued currently.
GuruFocus rated Camtek’s financial strength 7 out of 10. In addition to a comfortable level of interest coverage, the high Altman Z-Score of 4.73 indicates the company is in good standing. The ROIC also surpasses the WACC, so value is being created.
The company’s profitability also fared well with an 8 out of 10 rating. In addition to operating margin expansion, returns outperform a majority of industry peers. Camtek also has a moderate Piotroski F-Score of 6 and a one-star predictability rank.
Simons’ firm is the largest guru shareholder with 2.15% of Camtek’s outstanding shares. Catherine Wood (Trades, Portfolio) also owns the stock.
Mosaic
The firm whittled down the Mosaic (MOS, Financial) stake by 72.47%, selling 788,820 shares. During the quarter, shares traded for an average price of $49.83 each.
Royce now holds 299,710 shares total, giving it 0.17% space in the equity portfolio. Since being established in the fourth quarter of 2020, GuruFocus says the firm has gained approximately 86.20% on the investment.
The company headquartered in Tampa, Florida, which mines and processes phosphate and potash minerals into fertilizer and other crop nutrients, has a $22.72 billion market cap and an enterprise value of $27.17 billion; its shares were trading around $63.15 on Friday with a price-earnings ratio of 8.88, a price-book ratio of 1.96 and a price-sales ratio of 1.68.
According to the GF Value Line, the stock is significantly overvalued currently.
Mosaic’s financial strength was rated 6 out of 10 by GuruFocus on the back of sufficient interest coverage and a high Altman Z-Score of 3.18. The ROIC is also above to WACC, so value is being created.
The company’s profitability was rated 8 out of 10, driven by an expanding operating margin and strong returns that top a majority of competitors. Mosaic also has a high Piotroski F-Score of 8 as well as a one-star predictability rank.
With a 0.74% stake, Donald Smith & Co. is the company’s largest guru shareholder. David Tepper (Trades, Portfolio), Simons’ firm and Jeremy Grantham (Trades, Portfolio) also have significant positions in Mosaic.
Additional trades and portfolio performance
During the quarter, the firm pared a number of other holdings, including Rent-a-Center Inc. (RCII, Financial), added to its Louisiana-Pacific Corp. (LPX, Financial) and Forward Air Corp. (FWRD, Financial) positions, entered an Avalara Inc. (AVLR, Financial) investment and sold out of Canada Goose Holdings Inc. (GOOS, Financial).
Over half of Royce Investment Partners’ $11.78 billion equity portfolio, which was composed of 959 stocks, was invested in the industrials, technology and financial services sectors, followed by a slightly smaller exposure to the consumer cyclical space.
According to the firm’s website, the Royce Premier Fund posted a return of 16.36% in 2021, underperforming the S&P 500 Index’s 28.7% total return.
