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Holly LaFon
Holly LaFon
Articles (7842) 

Chuck Royce Expands Ownership in Most-Owned Stocks

January 14, 2013 | About:
Chuck Royce runs Royce & Associates, an investment company legendary for its small-cap focus and superior returns. As value investors, his team searches for stocks trading less than their estimate of the company’s intrinsic worth, or enterprise value. Employing this strategy and trading in numerous stocks, he beat over the past five years with a cumulative return of 33.7%, compared to the index’s 1.1% loss.

Recently, Royce has been adding to a significant number of stocks in his portfolio that he owns 5% or more of. On Monday he reported adding to his positions in three more such companies on Dec. 31, according to GuruFocus Real Time Picks: International Rectifier (IRF), Landauer (NYSE:LDR) and Maidenform Brands (MFB).

International Rectifier (IRF)

Royce increased his stake in stake in IRF by 3.94%, to own a total of 5,961,714 shares. After the purchase, he owns 8.62% of the company.

International Rectifier creates power management technology, which is used in computers, lighting, appliances, satellites, automobiles and defense systems. The company has a market cap of $1.3 billion and its stock has declined almost 10% over the past year.

IRF’s revenue in the past 12 months declined 15.8%, EBITDA declined 110.2% and book value declined 6.1%. Its midday trading price is $18.85, which is near its book value per share of $18.13.

Cash on the company’s balance sheet totals $508 million, and long-term liabilities total $42.45 million. It has no long-term debt.

In the first quarter 2013 results, released Nov. 1, 2012, IRF reported a 16.6% year-over-year decrease in revenue to $252.5 million. It also reported a net loss of $28.8 million, or $0.42 per fully diluted share, after net income of $22 million, or $0.31 per fully diluted share the previous year.

Though first quarter results exceeded their expectations, the company faced lower demand most of its end markets, particularly appliances and industrial goods. Demand remained strong in its performance computing and server end markets. It expects weak demand to continue through its December quarter.

IRF has a P/E of 25.4, P/B of 1 and P/S of 1.13, which is close to a three-year low.


IRF data by GuruFocus.com

Landauer (NYSE:LDR)

Royce increased his holding of Landauer by 4.22% at an average price of $60.64, expanding his ownership of the company to 9.56%. He owns 904,005 shares after the purchase.

Landauer is a radiation science and services company that provides services to organizations with potential exposure to ionizing radiation with its proprietary technology that enables the most precise measurements possible. The company has a $580.43 million market cap, and its stock has increased 15.9% over the past year.

In the past five years, Landauer’s revenue increased at an annual rate of 11.8%, EBITDA increased at a rate of 0.5% and book value increased at a rate of 9.6%. Its free cash flow declined at a rate of 5.4% during the same time.

Laudauer as of the end of third quarter 2012’s end has $52.8 million in cash on its balance sheet, along with $176.76 million in long-term liabilities and debt.

Revenue in the company’s fiscal year 2011 grew 26.5% year over year to $152.4 million, with its new medical products segment contributing $13.5 million to the increase. Net income decreased 21.5% to $19.5 million.

For fiscal year 2013, the company is anticipating revenue to be between $164 million to $168 million, and net income in the range of $21 million to $23 million.

Laundauer has a P/E of 29.9; its P/B at 6.68 and P/S at 4.47 are both near their respective one-year highs.


LDR data by GuruFocus.com

Maidenform Brands (MFB)

Royce grew his holding in Maidenform Brands by 10.37% for an average price of $19.49. The purchase brings his total holding to 2,195,332, or 9.31% of the company.

Maidenform Brands is an intimate apparel company with a portfolio of brands, selling in department stores, mass merchants, national chains, company-operate outlets and elsewhere. The company’s stock in the past year declined 7% to close at $19.77 in midday trading.

Over the last five years, the company’s top-line revenue grew at an annual rate of 7.5%, and book value grew at an annual rate of 23.7%. EBITDA during the same time decreased at an annual rate of 0.3%.

As of 2012’s third quarter end, Maidenform showed $157.92 million in cash on its balance sheet, along with $107.87 million in long-term liabilities and debt.

In the third quarter, the company reported bringing in $150.2 in net sales, a 1.3% increase year over year. Net income reached $10.74 million, compared to $10.2 million a year previously, with EPS of $0.46, compared to $0.44. EPS met the company’s expectations though revenue was lower than planned. The company expects to meet global economic challenges and increased competition with increased innovation, increased brand equity leverage and operational improvements.

For the fourth quarter it expects sales in the range of $130 million to $135 million, and EPS in the range of $0.20 and $0.24 per share.

Maidenform currently has a P/E of 18.6; its P/B at 1.72 and P/S at 0.72 are both close to three-year lows. Its price at $18.48 is also near a two-year low.


MFB data by GuruFocus.com

For more of Chuck Royce’s stock picks, see his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Chuck Royce.

Rating: 4.3/5 (6 votes)


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