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Sydnee Gatewood
Sydnee Gatewood
Articles (673) 

Chuck Royce Slims Down 2 Holdings in October

Small-cap guru reduces Bassett Furniture, Revolution Lighting positions

Royce & Associates, the firm lead by renowned value investor Chuck Royce (Trades, Portfolio), disclosed it trimmed two holdings on Oct. 31.

Using an active, bottom-up, risk-conscious and fundamental approach to stock picking, the New York-based firm specializes in small-cap securities. It seeks to find value opportunities among companies that are trading at a discount to enterprise value.

According to GuruFocus real-time picks, the investment firm reduced its holdings of Bassett Furniture Industries Inc. (NASDAQ:BSET) and Revolution Lighting Technologies Inc. (NASDAQ:RVLT).

Bassett Furniture

The firm curbed its stake in the Virginia-based furniture company by 39.24%, selling 394,477 shares for an average price of $19.75 per share. It now holds 610,855 shares, representing approximately 0.08% of the equity portfolio.

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GuruFocus estimates Royce has lost 24% on the investment since the fourth quarter of 2015.

The company, which manufactures and sells a variety of handmade living room, bedroom and dining room furniture, has a market cap of $210.85 million; its shares were trading around $19.82 on Friday with a price-earnings ratio of 18.87, a price-book ratio of 1.07 and a price-sales ratio of 0.52.

The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.

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Bassett Furniture’s financial strength and profitability and growth were both rated 7 out of 10 by GuruFocus. Supported by a comfortable level of interest coverage, the Altman Z-Score of 4.13 indicates the company is in good financial standing.

The company is also strengthened by an expanding operating margin, a high Piotroski F-Score of 7, which suggests conditions are stable, and a business predictability rank of one out of five stars, which is on watch as a result of a slowdown in revenue per share growth over the last 12 months. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.

Mario Gabelli (Trades, Portfolio) is now the company’s largest guru shareholder with 8.2% of outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies also holds the stock.

Revolution Lighting

The firm slashed its position in the Stamford, Connecticut-based company by 93.02%, selling 1.08 million shares for an average price of $1.54 per share. It now holds 81,200 shares.

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According to GuruFocus, Royce has lost roughly 67% on the investment since the second quarter of 2016.

Revolution, which makes LED lighting and lighting control products, has a $37.63 million market cap; its shares were trading around $1.58 on Friday with a price-book ratio of 0.51 and a price-sales ratio of 0.20.

According to the median price-sales chart, the stock is trading below its historical value.

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Revolution Lighting’s financial strength and profitability and growth were both rated 4 out of 10 by GuruFocus. As a result of poor earning quality, posting a loss in operating income over the last several years and issuing approximately $25.16 million in new long-term debt over the last three years, the Altman Z-Score of -0.61 warns the company is in danger of going bankrupt.

The company has also been hurt by weak margins, poor returns and a low Piotroski F-Score of 1, which suggests operations are in bad condition. Although the company has a one-star business predictability rank, it is on watch as a result of a decline in revenue per share over the last several years.

With 0.35% of outstanding shares, Royce is the company’s only guru shareholder.

Performance

Royce’s $14.45 billion portfolio, which is composed of 1,214 stocks as of the second quarter, is largely invested in the industrials and technology sectors.

As of June 30, the firm’s five largest holdings are Vishay Intertechnology Inc. (NYSE:VSH), Quaker Chemical Corp. (NYSE:KWR), Mineral Technologies Inc. (NYSE:MTX), UniFirst Corp. (NYSE:UNF) and Helios Technologies (NASDAQ:SNHY).

According to its fact sheet, the Royce Premier Fund returned 23.85% in 2017, outperforming the Russell 2000’s return of 14.65%.

As previously announced, Royce will be the keynote speaker at the 2019 GuruFocus Value Conference in Omaha, Nebraska next May. Get your tickets today!

Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am an editorial assistant at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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