According to GuruFocus’ top holdings data, Chuck Royce (Trades, Portfolio)’s five largest positions as of the end of fourth-quarter 2018 were Quaker Chemical Corp. (KWR, Financial), Meredith Corp. (MDP, Financial), Vishay Intertechnology Inc. (VSH, Financial), Standard Motor Products Inc. (SMP, Financial) and Marcus & Millichap Inc. (MMI, Financial).
The guru’s New York-based firm, Royce & Associates, specializes in small-cap companies. It picks stocks based on an active, bottom-up, risk-conscious and fundamental approach, looking for value opportunities among companies trading at a discount to enterprise value.
Royce is the keynote speaker for the 2019 GuruFocus Value Conference.
Quaker Chemical
The investor’s largest position is 713.137 shares of Quaker Chemical, representing 1.14% of the equity portfolio. GuruFocus estimates he has gained 37% on the investment since the third quarter of 2011.
The Conshohocken, Pennsylvania-based chemical company has a $2.63 billion market cap and an enterprise value of $2.55 billion; its shares were trading around $197.25 on Thursday with a price-earnings ratio of 44.39, a price-book ratio of 6.07 and a price-sales ratio of 3.01.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Quaker Chemical’s financial strength 7 out of 10. In addition to having adequate interest coverage, the robust Altman Z-Score of 8.60 indicates the company is in good fiscal standing. The company’s profitability and growth scored an 8 out of 10 rating, driven by operating margin expansion, consistent earnings and revenue growth and a high Piotroski F-Score of 8, which suggests business conditions are healthy. The company also has a business predictability rank of 2.5 out of five stars. GuruFocus says companies with this rank typically see their stocks gain an average of 7.3% per year.
Of the gurus invested in Quaker, Royce has the largest holding with 5.35% of outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Mario Gabelli (Trades, Portfolio) are also shareholders.
Meredith
Royce owns a 2.4 million-share stake in Meredith, which represents 1.10% of the equity portfolio. According to GuruFocus, he has gained an estimated 29% on the investment since the third quarter of 2010.
The media conglomerate, which is headquartered in Des Moines, Iowa, has a market cap of $2.56 billion and a $5.52 billion enterprise value; its shares were trading around $56.73 on Thursday with a forward price-earnings ratio of 7.09, a price-book ratio of 2.44 and a price-sales ratio of 0.87.
According to the Peter Lynch chart, the stock is overvalued.
Meredith’s financial strength was rated 4 out of 10 by GuruFocus. In addition to having weak interest coverage and poor earnings quality, the Altman Z-Score of 1.19 suggests the company is at risk of going bankrupt. The company’s profitability and growth fared much better, scoring a 7 out of 10 rating on operating margin expansion, strong returns that outperform industry peers and a moderate Piotroski F-Score of 4, which indicates business conditions are stable. The company also has a one-star business predictability rank. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per year.
With 5.66% of outstanding shares, Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder. John Rogers (Trades, Portfolio), Michael Price (Trades, Portfolio), Gabelli, Pioneer Investments (Trades, Portfolio), Hotchkis & Wiley, Simons’ firm and Joel Greenblatt (Trades, Portfolio) also own the stock.
Vishay Intertechnology
The guru holds 6.57 million shares of Vishay Intertechnology, which accounts for 1.06% of his equity portfolio. GuruFocus estimates he has gained 35% on the investment since third-quarter 2011.
The Malvern, Pennsylvania-based company, which manufactures semiconductors and electronic components, has a $2.88 billion market cap and an enterprise value of $2.61 billion; its shares were trading around $19.95 on Thursday with a price-earnings ratio of 8.88, a price-book ratio of 2.06 and a price-sales ratio of 1.01.
Based on the Peter Lynch chart, the stock appears to be undervalued.
Vishay’s financial strength and profitability and growth were both rated 7 out of 10 by GuruFocus. Although the company has sufficient interest coverage, the Altman Z-Score of 2.87 suggests it is under minor financial pressure. The company is also supported by an expanding operating margin that outperforms 73% of industry peers, a moderate Piotroski F-Score of 5 and a one-star business predictability rank.
Royce is the company’s largest guru shareholder with 4.56% of outstanding shares. Other top guru investors include Ken Fisher (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Simons’ firm, Greenblatt, Steven Cohen (Trades, Portfolio), Hotchkis & Wiley, Pioneer, Jeremy Grantham (Trades, Portfolio), Ray Dalio (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Standard Motor Products
Royce’s fourth-largest holding is 2.19 million shares of Standard Motor Products, which has an equity portfolio weight of 0.95%. GuruFocus data indicates he has made an estimated gain of 43% on the investment since third-quarter 2011.
The auto parts manufacturer, which is based in New York, has a market cap of $1.08 billion and a $1.12 billion enterprise value; its shares were trading around $48.19 on Thursday with a price-earnings ratio of 25.77, a price-book ratio of 2.31 and a price-sales ratio of 0.99.
The Peter Lynch chart suggests the stock is overvalued.
Standard Motors’ financial strength and profitability and growth were both rated 7 out of 10 by GuruFocus. Driven by strong interest coverage, the robust Altman Z-Score of 4.29 indicates the company is in good standing financially. Despite having a declining operating margin, the company is supported by strong returns that outperform competitors and a moderate Piotroski F-Score of 6. The one-star business predictability rank is on watch as a result of a slowdown in revenue per share growth over the last 12 months.
With 9.78% of outstanding shares, Royce is the company’s largest guru shareholder. Gabelli, Barrow, Hanley, Mewhinney & Strauss, Third Avenue Management (Trades, Portfolio), Hotchkis & Wiley, Jones, Greenblatt and Simons’ firm also have positions in the stock.
Marcus & Millichap
The investor has a 3.06 million-share stake in Marcus & Millichap, which accounts for 0.94% of the equity portfolio. According to GuruFocus, Royce has made an estimated gain of 35% on the investment since the first quarter of 2014.
The Calabasas, California-based commercial real estate brokerage company has a $1.51 billion market cap and a $1.16 billion enterprise value; its shares were trading around $38.70 on Thursday with a price-earnings ratio of 17.45, a price-book ratio of 3.73 and a price-sales ratio of 1.88.
According to the Peter Lynch chart, the stock is overvalued.
Marcus & Millichap’s financial strength and profitability and growth were both rated 8 out of 10 by GuruFocus. Boosted by comfortable interest coverage, the high Altman Z-Score of 9.19 suggests the company is financially healthy. The company is also supported by operating margin expansion, strong returns and a high Piotroski F-Score of 7.
Of the gurus invested in the stock, Royce has the largest stake with 7.84% of outstanding shares. Other top guru investors are Simons’ firm, Hotchkis & Wiley, Pioneer, Murray Stahl (Trades, Portfolio) and Greenblatt.
Portfolio and performance
Royce’s other top holdings as of year-end 2018 were Lincoln Electric Holdings Inc. (LECO, Financial), Air Lease Corp. (AL, Financial), Hubbell Inc. (HUBB, Financial), Lindsay Corp. (LNN, Financial) and Ares Management Corp. (ARES, Financial).
The firm’s $11.15 billion equity portfolio, which is composed of 1,143 stocks, is largely invested in the industrial and technology sectors.
According to its fact sheet, the Royce Premier Fund returned -10.4% in 2018, outperforming the Russell 2000’s -11.01% return.
As mentioned above, Royce will be the keynote speaker at the 2019 GuruFocus Value Conference in Omaha, Nebraska in May, joining Gabelli and Francisco GarcĂ Âa ParamĂ©s. The event will be held at the DoubleTree by Hilton Hotel Omaha Downtown. Reserve your spot by buying tickets today!
Disclosure: No positions.
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