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Royce International Premier Fund's Top Trades of the 3rd Quarter

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·7 min read
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- By Graham Griffin

The Royce International Premier Fund (Trades, Portfolio) has disclosed its portfolio for the third quarter. During the quarter, the fund added to positions in IPH Ltd. (ASX:IPH), Bravura Solutions Ltd. (ASX:BVS) and Lagercrantz Group AB (OSTO:LAGRB). Several positions were also reduced, including Daifuku Co. Ltd. (TSE:6383) and Bossard Holding AG (XSWX:BOSN).


The fund focuses on a limited number of "premier" non-U.S. small-cap companies with discernible competitive advantages, high returns on invested capital and sustainable, moat-like franchises. Managers seek to identify companies with notable strengths in industry structure, competitive positioning, operational efficiency, financial track record and corporate governance.

Portfolio overview

At the end of the quarter, the portfolio contained 58 stocks with no new holdings. Overall, it is valued at $900 million and it has seen a turnover rate of 6%. Top holdings as of the quarter end include TKC Corp. (TSE:9746), IMCD NV (XAMS:IMCD), IPH, Intertrust NV (XAMS:INTER) and Croda International PLC (LSE:CRDA).

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

By weight, the top three sectors represented are industrials (39.18%), technology (22.29%) and basic materials (12.89%).

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

IPH

The holding of IPH was boosted by 44.74% with the purchase of 1.59 million shares. The stock traded at an average price during the quarter of 7.43 Australian dollars ($5.25) and the addition represented a 0.91% impact on the portfolio. GuruFocus estimates the total gain of the holding to be 9.50%.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

IPH is an Australian holding company that provides intellectual property services and data analytics software development services. The company's intellectual property services, which is provided through the company's subsidiaries Spruson & Ferguson, Fisher Adams, Kelly Callinans, Pizzeys and Cullens, involve patents filing, prosecution, enforcement and management, designing and trademarks. The company's intellectual property software business, which is operated under a subscription license model, is carried out through the company's subsidiary Practice Insight.

As of Oct. 19, shares were trading at AU$7.44 with a market cap of AU$1.58 billion. The GF Value line suggests that the stock is currently trading at a significantly undervalued level.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

GuruFocus gives the stock a financial strength rating of 6 out of 10 and a profitability rank of 7 out of 10. There are currently two severe warning signs shown for assets growing faster than revenue and declining operating margin. Despite the decline, the operating margin percentage is currently outdoing 92.10% of the industry alongside a net margin percentage that beats 90.04% of the industry.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Bravura Solutions

The fund also saw the addition of 2.22 million shares of Bravura Solutions, representing a 35.06% increase in the holding and a 0.60% impact on the portfolio. The stock traded at an average price of AU$4.02 during the quarter and GuruFocus estimates the total loss on the holding at 11.70%.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Bravura Solutions is engaged in the development, licensing and maintenance of highly specialized administration and management software applications as well as the provision of professional consulting services. It has two operating segments: Wealth Management and Funds Administration. The company generates maximum revenue from the Wealth Management segment.

Oct. 19 saw shares of the stock trading at AU$3.34 with a market cap of AU$815.65 million. The Peter Lynch chart suggests that the stock is trading above intrinsic value.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

GuruFocus gives the company a financial strength rating of 8 out of 10 and a profitability rank of 5 out of 10. There is one severe warning sign issued for a low Piotroski F-Score. The company maintains strong operating and net margin percentages and has seen a slight increase in debt this year. Net income has increased year over year despite free cash flow going into negative territory.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Lagercrantz Group

The holding in Lagercrantz Group saw a massive addition in the third quarter totaling 2.19 million shares, a 140.29% increase. Overall, the purchase only had a 0.55% impact on the portfolio and shares traded at an average price of 59.51 Swedish krona ($6.74) during the quarter. GuruFocus estimates the total loss of the holding at 5.65%.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Lagercrantz Group AB is a Sweden-based company engaged in the provision of products and solutions in the electronics and communications industry. Business activity of the group is divided into four segments, namely the electronics division, mechatronics division, communications division and niche products division. The company derives the majority of revenue through the mechatronics division, which sells electric and electro-mechanical products and offers electric connection systems and customized production of cable harnesses, as well as develops support brackets and masts.

On Oct. 19, the stock was trading at 60.32 Swedish krona per share with a market cap of 12.11 billion Swedish krona. The Peter Lynch chart suggests that the stock has been trading above intrinsic value since 2014 and is overvalued.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

GuruFocus gives the company a financial strength score of 7 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 1 out of 10. There is currently a severe warning sign issued for assets growing faster than revenue amidst many medium warning signs. Revenue and net income have seen a slow and steady increase over the years, leading to the strong profitability rank.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Daifuku

The largest reduction in a holding was the sale of 70,800 shares of Daifuku, which represented a -0.78% impact on the portfolio. This sale saw the holding slashed by 34.1% as shares traded for an average price of 9,766.67 Japanese yen ($92.62) during the quarter. GuruFocus estimates the total gain of the holding at 67.46%.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Daifuku is a Japan-based company that provides solutions for logistics systems and material handling equipment. Its solutions are categorized into six segments. They include factory and distribution automation, e-factory automation, automotive factory automation, airport technology solutions, lifestyle products and electronics solutions.

Shares were trading at 11,090 yen on Oct. 19 with a market cap of 1.40 trillion yen. The GF Value line shows that the stock is currently significantly overvalued.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

GuruFocus gives the company a financial strength rating of 8 out of 10 and a profitability rank of 7 out of 10. There is currently one severe warning sign issued for a low Piotroski F-Score. The company has slowly reduced debt since 2015, leading to a cash-to-debt ratio of 2.08 that is higher than 63.67% of the industry.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Bossard Holding

The fund also saw the reduction of Bossard Holding with a sale of 23,800 shares that traded at an average price of 159.92 Swiss francs ($175.66) during the quarter. The sale represented a 21.91% reduction in the holding and a -0.46% impact on the holding. GuruFocus estimates the total gain of the holding at 13.77%.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Bossard Holding is an industrial products distributor. Geographically, it derives a majority of revenue from Europe and also has a presence in America and Asia.

Oct. 19 saw the stock trading at 161.60 francs per share with a market cap of 1.24 billion francs. According to the Peter Lynch chart, the stock is trading near intrinsic value.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 4 out of 10. There is one severe warning sign issued for assets growing faster than revenue. An Altman-Z Score places the company well into the safe zone despite rising levels of debt contributing to the lower than average cash-to-debt ratio of 0.19.

Royce International Premier Fund's Top Trades of the 3rd Quarter
Royce International Premier Fund's Top Trades of the 3rd Quarter

Disclaimer: Author owns no stocks mentioned.

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This article first appeared on GuruFocus.