Royce Investment Partners, the investment firm founded by Chuck Royce (Trades, Portfolio) in 1972, has made a name for itself through specializing in small-cap stocks.
The New York-based firm’s portfolio management team picks stocks through an active, bottom-up, risk-conscious and fundamental approach. They also search for value opportunities among companies trading at a discount to enterprise value.
As of the end of the fourth quarter, the industrials sector had the largest representation in the firm’s $9.57 billion equity portfolio with a 29.37% weight.
According to the 13F filing for the three months ended Dec. 31, the firm’s five largest industrial holdings are Air Lease Corp. (AL, Financial), Forward Air Corp. (FWRD, Financial), Valmont Industries Inc. (VMI, Financial), Arcosa Inc. (ACA, Financial) and Kadant Inc. (KAI, Financial).
Investors should be aware 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.
Air Lease
The firm trimmed its Air Lease (AL, Financial) stake by 1.11% during the fourth quarter, bringing the total to 2.53 million shares. It accounts for 1.02% of the equity portfolio and is now the second-largest position. GuruFocus estimates Royce has gained 19.49% on the long-held investment.
The Los Angeles-based company, which purchases aircraft from major manufacturers like Boeing (BA, Financial) and Airbus (XPAR:AIR, Financial) to lease to airlines, has a $4.81 billion market cap and an enterprise value of $22.68 billion; its shares were trading around $43.34 on Friday with a price-book ratio of 0.72 and a price-sales ratio of 2.08.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 81 out of 100, the GF Score indicates the company has good outperformance potential. While it received high ratings for profitability, GF Value and momentum, the growth and financial strength ranks were more moderate.
Of the gurus invested in Air Lease, Royce’s firm has the largest stake with 2.29% of its outstanding shares. Steven Cohen (Trades, Portfolio), Keeley-Teton Advisors, LLC (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Joel Greenblatt (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) also have positions in the stock.
Forward Air
Royce’s firm curbed its Forward Air (FWRD, Financial) investment by 1.10% during the quarter to 884,650 shares. The position occupies 0.97% of the equity portfolio and is the third-largest holding. GuruFocus data shows the firm has gained approximately 65.77% on the investment over its lifetime.
The asset-light freight and logistics company, which is headquartered in Greeneville, Tennessee, has a market cap of $2.79 billion and a $3.02 billion enterprise value; its shares were trading around $105.89 on Friday with a price-earnings ratio of 14.83, a price-book ratio of 3.96 and a price-sales ratio of 1.45.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 97 implies the company has high outperformance potential, driven by solid ratings for all five categories.
With a 3.33% stake, the firm is the largest guru shareholder of Forward Air. Other guru investors include Simons’ firm, Hotchkis & Wiley and Greenblatt.
Valmont Industries
The firm whittled down its Valmont Industries (VMI, Financial) position by 11.98% during the fourth quarter, bringing the total to 270,388 shares. As the sixth-largest holding, the stock represents 0.93% of the equity portfolio. GuruFocus found Royce has gained around 51.38% on the investment so far.
The Omaha, Nebraska-based company, which produces Valley center pivot and linear irrigation equipment, windmill support structures and lighting, traffic and utility poles, has a $7.01 billion market cap and an enterprise value of $7.81 billion; its shares were trading around $328.55 on Friday with a price-earnings ratio of 28.25, a price-book ratio of 4.44 and a price-sales ratio of 1.63.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The company has good outperformance potential with a GF Score of 86 on the back of high ratings for profitability and growth and middling marks for financial strength, GF Value and momentum.
Royce’s firm is the company’s largest guru shareholder with 1.27% of its outstanding shares. Valmont is also being held by Mario Gabelli (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Greenblatt and Murray Stahl (Trades, Portfolio).
Arcosa
Royce Investment cut its stake in Arcosa (ACA, Financial) by 11.76% during the quarter to 1.53 million shares. The position makes up 0.87% of the equity portfolio and is the eighth-largest holding. GuruFocus says the firm has gained approximately 61.28% on the investment to date.
The construction engineering company headquartered in Dallas, which provides infrastructure-related products and services, has a market cap of $3 billion and a $3.38 billion enterprise value; its shares were trading around $61.99 on Friday with a price-earnings ratio of 12.30, a price-book ratio of 1.37 and a price-sales ratio of 1.39.
The GF Value Line suggests the stock is fairly valued currently.
With a GF Score of 86, the company has good outperformance potential. Although Arcosa raked in high ratings for four of the criteria, the GF Value rank was more moderate.
Holding a 3.17% stake, Royce’s firm is Arcosa’s largest guru shareholder. Yacktman Asset Management (Trades, Portfolio), Gabelli, Simons’ firm, First Eagle and Greenblatt also own the stock.
Kadant
The firm slashed its Kadant (KAI, Financial) holding by 14.17% during the quarter to a total of 430,390 shares. With a weight of 0.80%, it is the firm’s ninth-largest position. GuruFocus research shows Royce has gained approximately 120.83% on the investment thus far.
The Westford, Massachusetts-based company, which supplies process and engineering equipment for a number of industries, has a $2.55 billion market cap and an enterprise value of $2.65 billion; its shares were trading around $218.67 on Friday with a price-earnings ratio of 21.13, a price-book ratio of 3.90 and a price-sales ratio of 2.82.
According to the GF Value Line, the stock is fairly valued currently.
The company has high outperformance potential due to its GF Score of 92. While Kadant recorded a low GF Value rank, the other four categories received high ratings.
Royce’s firm is once again the company’s largest guru shareholder with 3.69% of its outstanding shares. Grantham and Simons’ firm also have positions in Kadant.
Additional holdings
Other industrials stocks the firm held as of the end of 2022 included Lincoln Electric Holdings Inc. (LECO, Financial), Lindsay Corp. (LNN, Financial), Forrester Research Inc. (FORR, Financial), KBR Inc. (KBR, Financial) and John Bean Technologies Corp. (JBT, Financial).
