Royce Investment Partners revealed earlier this week it added to two holdings.
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 GuruFocus Real-Time Picks, a Premium feature based on 13D, 13G and Form 4 filings, the firm increased its Forrester Research Inc. (FORR, Financial) position by 8.37% and the Computer Task Group Inc. (CTG, Financial) investment by 12.62% on Sept. 30.
Impacting the equity portfolio by 0.05%, the firm upped its stake in Forrester Research (FORR, Financial) by 146,575 shares. The stock traded for an average price of $36.01 per share on the day of the transaction.
It now holds a total of 1.89 million shares, accounting for 0.70% of the equity portfolio. GuruFocus estimates Royce has gained 10.56% on the investment over its lifetime.
The Cambridge, Massachusetts-based market research company, which provides insight on existing and potential impacts of technology, has a $724.47 million market cap and an enterprise value of $711.43 million; its shares were trading around $38.17 on Thursday with a price-earnings ratio of 24.16, a price-book ratio of 3.43 and a price-sales ratio of 1.40.
The GF Value suggests the stock is modestly undervalued based on historical ratios, past financial performance and analysts’ future earnings projections.
The GF Score of 89 out of 100 indicates the company has good outperformance potential. It received high grades for profitability, growth and GF Value and middling ranks for financial strength and momentum.
Forrester Research reported its second-quarter results in July. It posted adjusted earnings of $1 per share on $148.2 million in revenue, which were up from the prior-year quarter.
GuruFocus rated Forrester’s financial strength 6 out of 10. Despite having adequate interest coverage, the Altman Z-Score of 2.45 indicates it is under some pressure since assets are building up at a faster rate than revenue is growing. The weighted average cost of capital also overshadows the return on invested capital, meaning the company is struggling to create value as it grows.
The company’s profitability also fared well with an 8 out of 10 rating. Although the operating margin is in decline, its returns on equity, assets and capital overall outperform competitors. Forrester also has a moderate Piotroski F-Score of 6 out of 9, indicating conditions are typical for a stable company. Consistent earnings and revenue growth contributed to a predictability rank of 2.5 out of five stars. According to GuruFocus research, companies with this rank return an average of 7.3% annually over a 10-year period.
Royce’s firm has the largest stake in Forrester with 10% of its outstanding shares. The stock is also held by Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Jeff Auxier (Trades, Portfolio).
Computer Task Group
With an impact of 0.01% on the equity portfolio, the firm’s Computer Task Group (CTG, Financial) stake was boosted by 175,858 shares. On the day of the transaction, shares traded for an average price of $6.70 each.
Royce Investment now holds 1.56 million shares in total, which represent 0.11% of the equity portfolio. GuruFocus data shows it has lost an estimated 50.48% on the investment so far.
The information technology consulting company, which is headquartered in Buffalo, New York, has a market cap of $110.65 million and an enterprise value of $92.33 million; its shares were trading around $7.13 on Thursday with a price-earnings ratio of 7.35, a price-book ratio of 1.16 and a price-sales ratio of 0.28.
According to the GF Value Line, the stock is modestly overvalued currently.
The company has average performance potential based on its GF Score of 75. While it raked in high points for profitability, financial strength and momentum, it got a middling mark for growth and a low grade for GF Value.
Computer Task Group reported its second-quarter results in August. It posted adjusted earnings of 15 cents per share on $82.76 million in revenue. While earnings were up from the year-ago quarter, sales declined.
Computer Task Group’s financial strength was rated 8 out of 10 by GuruFocus, driven by sufficient interest coverage and a high Altman Z-Score of 4.6 that indicates it is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also eclipses the WACC, so value creation is occurring.
The company’s profitability scored a 7 out of 10 rating on the back of operating margin expansion and strong returns that are outperforming versus industry peers. Computer Task Group also has a moderate Piotroski F-Score of 6. Despite recording a decline in revenue per share over the past year, it has a one-star predictability rank. GuruFocus found companies with this rank return, on average, 1.1% annually.
With a 10.11% stake, Royce’s firm is Computer Task Group’s largest guru shareholder. Simons’ firm also owns the stock.
Portfolio composition and performance
Royce Investment Partners’ $9.71 billion equity portfolio, which the 13F filing showed was composed of 936 stocks as of the end of the second quarter, is most heavily invested in the financial services, industrials, technology and consumer cyclical sectors.
The firm’s five largest holdings as of June 30 were SEI Investments Co. (SEIC, Financial), Valmont Industries Inc. (VMI, Financial), Vontier Corp. (VNT, Financial), Standard Motor Products Inc. (SMP, Financial) and Vishay Intertechnology Inc. (VSH, Financial).
The Royce Premier Fund returned 16.36% in 2021, underperforming the S&P 500 Index’s return of 28.7% and outperforming the Russell 2000’s 13.69% return.
Investors should be aware that 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 they 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.