Chuck Royce is the founder and co-chief investment officer of Royce Investment Partners. This firm operates as a family of mutual funds that have a focus on small-cap investing. In his five-decade-long investing career, he has established himself as one of the most influential small-cap investors in the world. Chuck Royce’s portfolio is currently valued at $10.9 billion and has 825 holdings.
The biggest holdings include Acrosa Inc, Air Lease Corp, and MKS Instruments Inc. Some of the new additions to the portfolio are Advance Auto Parts Inc. (NYSE:AAP) and IDT Corp (NYSE:IDT). Avid Technologies (AVID) and Skyward Specialty Insurance Group Inc (NASDAQ:SKWD) are recent holding exits.
The portfolio value of the firm reached its peak in 2021 when it was at a reported $15 billion, and in the last two years, it is keeping between $9.5 and $11 billion. Stay with us while we go through the complex structure of Royce hedge funds, their strategy, holdings, and their performance.
Key Holdings
- Arcosa Inc (NYSE:ACA) with 1.11% of the portfolio
Chuck Royce currently has 1.46 million shares in Arcosa Inc. holding. During late 2021 and up until mid-2022, he has been piling up their stocks while the price was down. At that time the stock price varied between $45 and $58. He started trimming this holding in late 2022 and 2023 when the price went up. Currently, the price is steadily above $70. Royce invested a total of $54.8 million while the current value of the holding is at $119 million. This trade brought a gain of 117% so far.
- Air Lease Corp (NYSE:AL) with 1.09% of the portfolio
AL is an old holding in Royce’s portfolio going back to 2013. In that period Royce invested $97.4 million while the current value of the holding is at $133 million. The stock price fluctuated between $20 and $55 in the last three years and now it is at $47. This holding brought him a gain of 37%.
- MKS Instruments Inc (NASDAQ:MKSI) with 1.06% of the portfolio
There are 1.19 million stocks in this holding, and the majority of this stake was bought in 2013 for a mere $27 per stock. In the last two years, the stock price was always above $75, and in the last half a year is on a steep rise. From the beginning of 2024, the price jumped from $97 to $121. Royce invested in this holding $38.9 million, while it is currently valued at $136 million. This trade proved to be very lucrative generating a gain of 249% so far.
- Ziff Davis Inc (NASDAQ:ZD) with 0.94% of the portfolio
J2 Global changed its name to Ziff Davis in late 2021. Since late 2021 Royce has been steadily increasing his stake in the company from 1.15 million to 1.51 million shares. The share price is on a downturn spiral. In Q1 2023 its price was at $78 while currently, it is at $62.
- Innospec Inc (NASDAQ:IOSP) with 0.94% of the portfolio
After a price plunge in 2020, Innospec has seen a steady rise, especially in late 2023 and 2024. Royce bought the majority of the stake in 2013 for $40. Since 2023 the price hasn’t gone below $100, and it is now at $122. He invested $44.5 million, while the current value is at $101 million. This holding generated a gain of 126% so far.
- Kadant Inc (NYSE:KAI) with 0.89% of the portfolio
Kadant is another long-term holding that goes more than a decade back. Like with other major holdings Royce started big, buying large stakes in the company. In this case, the price went up from $26 to current $317. His investment in this company is at $20.8 million, while the value went up to $109 million. This is one of the most productive holdings in Royce’s portfolio, generating a gain of 425%.
- SEI Investments Co (NASDAQ:SEIC) with 0.86% of the portfolio
SEI Investment follows the pattern and trademark of Royce’s investment approach. Buy big in the beginning and hold as long it brings back the returns. The returns are not so lavish like with some other holdings but they are not something to sneeze at. The price went from $27 to current $68. Total investment was $50.1 million, while its value went up to $100 million, generating a 100% gain.
Sector Focus
Royce Investment Partners has a focus on the industrials and technologies sectors. However, their hedge fund portfolio is well diversified amongst other sectors. Their current sector allocation is:
- Industrials with 26.9% of the portfolio valued at $2.92 billion
- Technology with 20.4% of the portfolio valued at $2.21 billion
- Finance with 13.3% of the portfolio valued at $1.44 billion
- Consumer Discretionary with 10.3% of the portfolio valued at $1.12 billion
- Real Estate with 6.3% of the portfolio valued at $687 million
- Healthcare with 6.3% of the portfolio valued at $678 million
- Materials with 5.2% of the portfolio valued at $567 million
- Consumer Staples with 2.8% of the portfolio valued at $301 million
- Utilities with 2.4% of the portfolio valued at $259 million
- Energy with 1.6% of the portfolio valued at $175 million
- Telecommunications with 0.7% of the portfolio valued at $79.7 million
- Other with 3.7% of the portfolio valued at $405 million.
Chuck Royce and Royce & Associates Background
Chuck Royce showed interest in investing from an early age, and he aimed to gather as much knowledge and experience before starting his business. He acquired an MBA from Columbia University and in 1972 he bought Quest Advisory Corp. In 1997 he changed the firm’s name to Royce & Associates.
In 2001 Royce & Associates became an independent subsidiary of Legg Mason. After 42 years at the helm of the firm Chuck Royce in 2014 stepped down from the position of the firm’s president. Since then Christopher D. Clark has held the position of president.
Chuck Royce Investment Philosophy and Approach
Chuck Royce is a pioneer in small-cap investing. Although these investments throughout history brought smaller returns, he believes if chosen properly they can prove their mettle. Thanks to the new technologies it is much easier to keep track of thousands of small-cap companies in the United States market.
Royce is always on the lookout for companies that are dropping down, and are getting even smaller. But, not every small-cap firm that is in trouble is a good choice. He and his partners are committed to a detailed bottom-up approach. It includes assessing the company’s fundamentals and putting the macroeconomic factors in second place.
When investing Royce aims to keep his stake in the companies for a long time, and in an ideal world, forever. One other thing that draws Royce to a specific company is paying off the dividends. Also, he often turns to fresh initial public offerings (IPOs). He identifies them in the beginning and waits for a year or two to see the change in stock price.
Other key factors when choosing an investment are company culture, the management team, and the strategy. He points out the importance of integrity and quality in management. He and the team often even talk with the customers and according to Royce sometimes that is the best way to understand how a firm works.
Take A Look At Chuck Royce, Master Of Small Caps:
Chuck Royce Portfolio Performance Analysis
From the available data, we can assess that Chuck Royce’s portfolio 10-year returns are at 93.98%. This results in a 9.4% annual gain. In the last 5 years, the numbers are almost identical with a gain of 51.71%. The performance dropped in 2020, resulting in overall 3-year performance going down to 0.32%. Last year showed promise with a gain of 20%.
Chuck Royce Portfolio Outlook and Future Trends
Chuck Royce and Partners are still committed to their preferred small-cap investment strategy. In their recent statements, they noted that the U.S. market still has a great potential for small-cap investments.
On March 11 company’s Co-CIO Francs Gannon pointed out that both economic and investment conditions are creating advantages for the development of higher-quality small-cap companies.
These are clear signals that Royce and Partners are still looking to invest in small-cap companies. This can also be seen from their portfolio, where 95% of the holdings are small-cap firms.
FAQ
What is the Net Worth of Chuck Royce?
As of 2024, the Net Worth of Chuck Royce is estimated at least $38 million. He owns:
- Royce Micro Cap Trust Inc. stocks valued at $13 million
- Sprott Focus Trust Inc. stocks worth over $10 million
- Royce Global Value Trust Inc. stocks worth over $9 million.
Besides those Royce also owns stakes in Royce Value Trust Inc and Oxford Lane Capital Corp.
Final Thoughts
Chuck Royce is a small-cap veteran who has been going against the herd for over half a century. While rarely dared to venture into small-cap investing endeavors, Royce saw an opportunity and exploited it. He made it his career.
With a lot of space in that particular market, Royce had a chance to maneuver and get all the ins and outs of this market. Still today not many are willing to go down this road, while Royce’s sights are still on the same target. Regarding accomplishments, should we even need to mention anything else than an impactful career half a century-long?
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