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- By Sydnee Gatewood
Royce Investment Partners revealed earlier this week it reduced three positions and added to another in December.
The New York-based firm, which was founded in 1972 by Chuck Royce (Trades, Portfolio), specializes in small-cap companies. The portfolio management team picks stocks based on an active, bottom-up, risk-conscious and fundamental approach. They also search for value opportunities among companies trading at a discount to enterprise value.
According to Real-Time Picks, a Premium GuruFocus feature, the firm curbed its holdings of Kimball International Inc. (NASDAQ:KBAL), Synalloy Corp. (NASDAQ:SYNL) and Seacor Marine Holdings Inc. (NYSE:SMHI) on Dec. 31. It also added to its position in Northwest Pipe Co. (NASDAQ:NWPX).
After reducing the Kimball International position by 5.74% in the third quarter, the firm slashed it another 90.31%, selling 1.56 million shares. The trade had an impact of -0.2% on the equity portfolio. The stock traded for an average price of $11.95 per share on the day of the transaction.
Royce's firm now holds 167,388 shares of Kimball total, representing 0.02% of the equity portfolio. GuruFocus estimates the firm has gained 12.94% on the investment.
The Jasper, Indiana-based company, which owns three furniture brands, has a $470.84 million market cap; its shares were trading around $12.79 on Thursday with a price-earnings ratio of 13.61, a price-book ratio of 1.92 and a price-sales ratio of 0.7.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued. The GuruFocus valuation rank of 7 out of 10 also supports this assessment.
GuruFocus rated Kimball International's financial strength 9 out of 10. In addition to a comfortable level of interest coverage, the high Altman Z-Score of 5.93 indicates the company is in good standing. The return on invested capital also significantly surpasses the weighted average cost of capital, indicating good value creation.
The company's profitability scored a 7 out of 10 rating, driven by an expanding operating margin, returns that outperform over half of its competitors and a high Piotroski F-Score of 7, which indicates business conditions are healthy. Kimball International also has a predictability rank of one out of five stars, which is on watch as a result of revenue per share declining over the past 12 months. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Kimball International, Jim Simons (Trades, Portfolio)' Renaissance Technologies has the largest stake with 6.81% of outstanding shares. Other top guru shareholders are Jeremy Grantham (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Caxton Associates (Trades, Portfolio).
With an impact of -0.04% on the equity portfolio, the firm curbed its Synalloy holding by 49.92%, selling 465,793 shares. Shares traded for an average price of $7.80 each on the day of the transaction.
The firm now holds 467,379 shares total, accounting for 0.04% of the equity portfolio. GuruFocus data shows it has lost 11.2% on the investment so far.
The company, which is headquartered in Richmond, Virginia, manufactures metals and chemicals. Synalloy has a market cap of $75.61 million; its shares were trading around $8.30 on Thursday with a price-book ratio of 0.85 and a price-sales ratio of 0.28.
According to the median price-sales chart, the stock is undervalued. The GuruFocus valuation rank of 9 out of 10 aligns with this assessment.
Synalloy's financial strength was rated 3 out of 10. Due to issuing approximately $43.84 million in new long-term debt over the past three years, the company has poor interest coverage. The Altman Z-Score of 2.04 also indicates it is under some pressure since the company has recorded losses in operating income over the past three years.
Weighed down by negative margins and returns that underperform a majority of industry peers, the company's profitability scored a 5 out of 10 rating. Synalloy's Piotroski F-Score of 4 indicates business conditions are stable, but its one-star predictability rank is on watch as a result of revenue per share declining over the past year.
Royce's firm is still Synalloy's largest guru shareholder with 5.13% of outstanding shares. Simons' firm also owns the stock.
Seacor Marine Holdings
Impacting the equity portfolio by -0.01%, Royce's firm reduced its Seacor Marine position by 65.97%, selling 420,499 shares. The stock traded for an average per-share price of $2.71 during the quarter.
Royce Investment Partners now holds 216,957 shares total, making up 0.01% of the equity portfolio. GuruFocus data shows the firm has lost an estimated 68.63% on the investment so far.
The Houston-based company, which provides marine and support transportation services to offshore oil producers, has a $78.02 million market cap; its shares were trading around $3.34 on Thursday with a price-book ratio of 0.2 and a price-sales ratio of 0.45.
Based on the median price-sales chart, the stock appears to be overvalued.
GuruFocus rated Seacor Marine's financial strength 2 out of 10. The Altman Z-Score of 0.08 warns the company could be in danger of going bankrupt if it does not improve its liquidity position. It has also recorded a decline in revenue per share over the past three years.
The company's profitability fared even worse, scoring a 1 out of 10 rating on the back of negative margins and returns that underperform a majority of competitors. Seacor Marine is supported, however, by a moderate Piotroski F-Score of 4.
Royce's firm holds 0.93% of the company's outstanding shares.
Following a 3.28% reduction in the third quarter, the firm upped its stake in Northwest Pipe by 10.01%, buying 93,450 shares. The trade had an impact of 0.03% on the equity portfolio. The stock traded for an average price of $28.30 per share on the day of the transaction.
Royce's firm now holds 1.02 million shares total, giving it 0.31% space in the equity portfolio. GuruFocus data shows it has gained approximately 15.35% on the investment so far.
Headquartered in Vancouver, Washington, the company, which manufactures engineered welded steel pipe water systems, has a market cap of $292.88 million; its shares were trading around $29.87 on Thursday with a price-earnings ratio of 11.39, a price-book ratio of 1.13 and a price-sales ratio of 1.
The Peter Lynch chart suggests the stock is undervalued. The GuruFocus valuation rank of 7 out of 10 aligns with this assessment.
Northwest Pipe's financial strength was rated 7 out of 10 by GuruFocus, driven by a comfortable level of interest coverage and a high Altman Z-Score of 3.85. The ROIC also eclipses the WACC, indicating good value creation.
The company's profitability did not fare quite as well, scoring a 4 out of 10 rating on the back of margins and returns that outperform a majority of industry peers. Northwest Pipe also has a moderate Piotroski F-Score of 5 as well as a one-star predictability rank.
With a 10.47% stake, Royce's firm is the company's largest guru shareholder. Prem Watsa (Trades, Portfolio) and Simons' Renaissance Technologies also have positions in the stock.
Portfolio composition and performance
Nearly half of Royce Investment Partners' $9.27 billion equity portfolio, which was composed of 989 stocks as of the end of the third quarter, was invested in the industrials and technology sectors, followed by smaller holdings in the financial services and consumer cyclical spaces.
According to the firm's website, the Royce Premier Fund returned 34.13% in 2019, outperforming both the S&P 500 Index's return of 31.49% and the Russell 2000's 25.52% return. Performance data for fiscal 2020 has not yet been released.
Disclosure: No positions.
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This article first appeared on GuruFocus.