Small-cap guru Chuck Royce (Trades, Portfolio) released his fourth-quarter portfolio last week, listing 85 new positions.
The investor’s firm, Royce & Associates, says on its website it prefers to invest in smaller companies that are trading at a significant discount to their estimated worth, or enterprise value. Its vast portfolio of 1,246 stocks is largely composed of securities in the industrials sector. According to its fact sheet, the Royce Premier Fund returned 23.85% in 2017, outperforming the Russell 2000’s 14.65% return.
Royce’s top five new buys for the quarter were Whiting Petroleum Corp. (WLL, Financial), Genesco Inc. (GCO, Financial), VeriFone Systems Inc. (PAY, Financial), Mallinckrodt PLC (MNK, Financial) and GasLog Ltd. (GLOG, Financial).
Whiting Petroleum
Having previously exited a position in Whiting Petroleum in the second quarter of 2012, Royce established a new holding of 477,500 shares for an average price of $23.37 per share. The trade had an impact of 0.08% on the portfolio.
The Denver-based oil and gas company has a market cap of $2.05 billion; its shares were trading around $22.64 on Tuesday with a price-book (P/B) ratio of 0.44 and a price-sales (P/S) ratio of 1.43.
The Peter Lynch chart below shows the stock is trading close to its fair value.
GuruFocus rated Whiting’s financial strength 4 out of 10 and its profitability and growth 5 of 10.
Hotchkis & Wiley has the largest position in Whiting among the gurus, holding 9.8% of outstanding shares. Arnold Schneider (Trades, Portfolio), John Griffin (Trades, Portfolio), Jim Simons (Trades, Portfolio), Richard Snow (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) are also shareholders.
Genesco
Royce invested in 342,451 shares of Genesco for an average price of $27.43 per share, giving it 0.07% portfolio space. He previously exited a position in the company in the second quarter of 2017.
The Nashville, Tennessee-based specialty retailer has a market cap of $693.97 million; its shares were trading around $354.85 on Tuesday with a forward price-earnings (P/E) ratio of 8.99, a price-book ratio of 0.92 and a price-sales ratio of 0.23.
According to the Peter Lynch chart below, the stock is undervalued as it is trading below its fair value.
Genesco’s financial strength was rated 6 out of 10 by GuruFocus. Its profitability and growth was rated 7 of 10.
With this transaction, Royce became the company’s largest guru shareholder with 1.72% of outstanding shares. Simons and Barrow, Hanley, Mewhinney & Strauss also own the stock.
VeriFone Systems
The investor purchased 629,800 shares of VeriFone for an average price of $18.61 per share, expanding the portfolio 0.07%.
The San Jose, California-based provider of electronic payment solutions has a market cap of $1.9 billion; its shares were trading around $17.19 on Tuesday with a forward price-earnings ratio of 11.63, a price-book ratio of 2.56 and a price-sales ratio of 1.04.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.
GuruFocus rated VeriFone’s financial strength 4 out of 10 and its profitability and growth 5 of 10.
With 7.42% of outstanding shares, Sarah Ketterer (Trades, Portfolio) is VeriFone’s largest guru shareholder. Ken Fisher (Trades, Portfolio), Snow, Richard Pzena (Trades, Portfolio), Simons, Joel Greenblatt (Trades, Portfolio), NWQ Managers (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, David Dreman (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) are also shareholders.
Mallinckrodt
The guru bought 405,000 shares of Mallinckrodt for an average price of $26.89 per share, giving it 0.06% portfolio space. He previously sold out of the stock in the fourth quarter of 2014.
The U.K.-based pharmaceutical company has a market cap of $1.53 billion; its shares were trading around $16.02 on Tuesday with a price-earnings ratio of 4.35, a price-book ratio of 0.30 and a price-sales ratio of 0.48.
The Peter Lynch chart below shows the stock is trading close to its fair value.
Mallinckrodt’s financial strength was rated 4 out of 10 by GuruFocus. Its profitability and growth was rated 5 of 10.
Of the gurus invested in the company, John Paulson (Trades, Portfolio) has the largest position with 6.98% of outstanding shares. Cohen, Schneider, Dreman and First Eagle Investment (Trades, Portfolio) also own the stock.
GasLog
After selling out of GasLog in the fourth quarter of 2014, Royce established a new position of 365,000 shares, paying an average price of $18.42 per share. The trade had an impact of 0.05% on the portfolio.
The Monaco-based company, which owns, operates and manages liquefied natural gas (LNG) vessels, has a market cap of $1.51 billion; its shares were trading around $18.70 on Tuesday with a price-earnings ratio of 53.44, a price-book ratio of 1.62 and a price-sales ratio of 2.91.
According to the Peter Lynch chart below, the stock is trading above its fair value, suggesting it is overpriced.
GasLog’s financial strength was rated 4 out of 10 by GuruFocus. Its profitability and growth was rated 9 of 10. The company’s trailing and forward dividend yields are both 3%. The dividend payout ratio is 1.60.
Simons is the company’s only other guru shareholder. Both investors hold 0.45% of its outstanding shares.
Other trades
Additional positions Royce established during the quarter include Milacron Holdings Corp. (MCRN, Financial), Perry Ellis International Inc. (PERY, Financial), Ribbons Communications Inc. (RBBN, Financial), 3D Systems Corp. (DDD, Financial) and GasLog Partners LP (GLOP, Financial). You can view all of his trades for the quarter here.
Disclosure: No positions.
