article , video 11-20-2015

Managing a Portfolio of Premier Businesses

Portfolio Managers Lauren Romeo and Steven McBoyle share the lessons they've learned from working with Chuck Royce and how they work together to build the portfolio of premier businesses in Royce Premier Fund.

TELL US
WHAT YOU
THINK

Lessons from Working with Chuck

Lauren Romeo: Chuck is great at taking a big picture approach. It’s important that we step back and look at a company and what its business model could look like five years from now, and really focusing in on the three or four issues that are going to be critical to getting the company to that stage. Related to that is not getting caught up in the short-term noise that ultimately is not really going to have an impact on the firm’s long-term value. 

Intellectual honesty is another characteristic that Chuck really emphasizes and has imbued in all of us. It’s very important to have the courage of your convictions, but it’s a fine line between having that and becoming so anchored to a position that you’re blind to changes to the investment case.

Chuck is great at constantly reexamining the investment case on individual positions as new information comes about, and he’s able to separate himself from the emotional attachment he may have to a company and is willing to move on from something if he has evidence that undermines the existing investment case.

Steven McBoyle: What I’ve learned working with Chuck, to name a few: one, patience. To remain disciplined as it applies to well-reasoned, well-researched opinions, how to take advantage of market psychology, how to best analyze business ecosystems and the forces that are all at play, but perhaps, most succinctly, and perhaps most importantly, that quality in the end wins out.

Market Maps

Lauren: Steve is a great addition to the team, and one of the things that he brings is an extensive knowledge of companies in general. But also, he has a great knowledge of most of the companies that are already in the Premier portfolio. I’ve sat in a lot of meetings with him where he’ll pull out a file where he’s got notes going back, you know, 10 years with various meetings with managements of the companies. It’s information like that that is a core part of our conviction-building process.

Another unique thing that Steve brings is he creates market maps for companies that we’re looking at. The market map is an analytical framework that shows the various stakeholders around the company: competitors, customers, and suppliers. So it gives you an opportunity to see what’s going on not only with the company itself, but also these third parties and how changes in those industries may be affecting changes in the company that we’re looking at.

The market map is really a new tool that Steve’s brought to the team that’s really helped our investment process, particularly in the area of understanding industry structure and is it an industry structure that supports superior profitability going forward.

Team Dynamic

Steven: Lauren is an exceptional portfolio manager and, perhaps just as importantly, an incredible business analyst. Lauren has been operating in the quality zone for many years, so with that comes a wealth of knowledge as it applies to industries, businesses, and the ability to apply pattern recognition to certain business models.

More specifically, Lauren is remarkable in terms of her level of diligence as it applies to the research process. Again, with the Premier Fund, we can identify quality companies, but you have to be able to substantiate that with deep diligence in terms of attempting to assign a predictive element to how we think that business is going to evolve. I think Lauren provides and incredible wealth of abilities in that zone.

I rely on Lauren for intellectual honesty and intellectual debate, particularly as it applies to our everyday process of effectively building conviction in potential and existing portfolio companies. I think we’re both humble in personality, but arrogant in process. So we actually enjoy challenging each other in terms of that conviction-building process.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money.

Royce Premier Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets in foreign securities (measured at the time of investment), which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.)

Insights & News

Share:

Subscribe:

Sign Up

Follow: