Chuck Royce’s Firm Makes Chang
Royce Investment Partners revealed earlier this week that it reduced one position, added another and sold one position in May.
The New York-based company, founded in 1972 by Chuck Royce (Trades, Portfolio), specializes in small-cap companies. The portfolio management team selects stocks based on an active, bottom-up, risk-aware and fundamental approach. They also look for value opportunities among companies that are trading below the company value.
According to Real-Time Picks, a premium feature of GuruFocus, the company has reduced its stake in International Money Express Inc. (IMXI, financial), strengthened its GCM Grosvenor Inc. (GCMG, financial) and divested of its Ra Medical Systems Inc. (RMED, Financial) investment on May 31.
International Money Express
After reducing the International Money Express (IMXI, Financial) by 29.81% in the first quarter, the company further reduced it by 96.09%, selling 2.7 million shares. The transaction had an impact of -0.28% on the equity portfolio. The stock was trading at an average price of $ 15.27 per share on trade day.
Royce’s company now owns 110,300 shares in total, representing 0.01% of the share portfolio. GuruFocus estimates that the company has gained 4.29% on the investment so far.
The Miami-based company, which provides money transfer services between the United States and Latin American countries, has a market capitalization of $ 606.33 million; its shares were trading around $ 15.49 on Tuesday with a price-to-earnings ratio of 16.03, a price-to-book ratio of 5.62 and a price-to-sell ratio of 1.59.
The Peter Lynch chart shows that the stock is trading above its fair value, suggesting that it is overvalued.
Both the financial strength and profitability of International Money Express are rated 6 out of 10. In addition to adequate interest coverage, the company is supported by a strong Altman Z-Score of 4.7. Return on invested capital also significantly exceeds the weighted average cost of capital, indicating that value is created as the business grows.
The company is also supported by an expanding operating margin, strong returns on equity, assets and capital that outperform the majority of its competitors and a moderate Piotroski F-Score of 5, which suggests that the business conditions are stable.
Royce’s company owns the largest stake in International Money Express with 0.28% of its shares outstanding. Jim Simons (Trades, Portfolio) ‘Renaissance Technologies and Ruane Cunniff (Trades, Portfolio) also own the stock.
With an impact of 0.03% on the equity portfolio, the firm strengthened its GCM Grosvenor (GCMG, Financial) by 6.16%, buying 311,649 shares. The shares traded at an average price of $ 11.95 each on trade day.
The company now owns 5.37 million shares in total, or 0.43% of the share portfolio. GuruFocus data shows it has lost around 9.94% on investment since Q4 2020.
The alternative asset management firm, headquartered in Chicago, has a market capitalization of $ 2.01 billion; its shares were trading around $ 10.84 on Tuesday with a price-to-sell ratio of 4.61.
According to the price chart, the stock has remained relatively stable since its IPO in November 2020.
GCM Grosvenor’s financial strength and profitability were both rated 3 out of 10. In addition to the low debt ratios, the company’s Altman Z-Score of 2.46 indicates that it is under some pressure.
The company is also weighed down by negative margins and returns that underperform the majority of its industry peers.
With a 2.88% stake, Royce’s company is the company’s largest shareholder guru. Steven Cohen (Trades, Portfolio) also holds a position in GCM Grosvenor.
Ra medical systems
With an impact of -0.01% on the equity portfolio, Royce’s company eliminated its stake in Ra Medical Systems (RMED, Financial), selling 317,583 shares. The stock was trading at an average price per share of $ 3.25 on trade day.
Since the position was created in the second quarter of 2019, GuruFocus said Royce Investment Partners gained approximately 36.89% on the investment.
The Carlsbad, Calif., Medical device company, which manufactures advanced excimer laser systems to treat vascular and dermatological diseases, has a market cap of $ 38.03 million; its shares were trading around $ 7.78 on Tuesday with a price-to-book ratio of 1.62 and a price-to-sell ratio of 3.56.
Based on the median price-to-sell chart, the stock appears to be overvalued.
GuruFocus has rated Ra Medical’s financial strength at 3 out of 10. The Altman Z-Score of -9.93 warns that the company could be in danger of bankruptcy if it does not improve its liquidity position. Sloan’s ratio is also indicative of poor earnings quality.
The company’s profitability was even worse, scoring a 1 out of 10 thanks to negative margins and returns that underperform the majority of its competitors. Ra Medical also has a low Piotroski F-Score of 2, which indicates that the operating conditions are in poor condition. It has also experienced a decline in revenue per share over the past five years.
Simons’ company owns 4.77% of the outstanding shares of the company.
Portfolio composition and performance
Nearly half of Royce Investment Partners’ $ 14.88 billion equity portfolio, which consisted of 1,012 stocks at the end of the first quarter, was invested in industrials and technology sectors, followed by smaller stakes in financial services and consumer cyclical spaces.
According to the company’s website, the Royce Premier Fund returned 11.5% in 2020, underperforming both the return of the S&P 500 Index by 18.4% and the 20% return of the Russell 2000.