article , video 12-03-2015

Growth Themes Benefiting from a Steady Economy

Well, we continue to see new ideas in a variety of sectors – the healthcare area, which has done particularly well in the market as well as for us has been a good place to find new ideas. I would say that business services is another area.

One of the bigger themes that we have going right now is in our growth restaurant and retailer theme. As many of us know, the economy, the backdrop for consumer spending has improved.

We have seen lower unemployment, which more people with jobs is good for spending. They have greater confidence to go out and spend money. Lower energy and fuel prices have been a big tailwind, in my opinion, and so I think, even though the consumer is saving more money, he is also spending more.

So one of our favorites happens to be the Container Store, which is a growth retailer. It has had a bit of a rocky start since it came public about a year and a half ago but it reminds me a lot of those long term runway companies.

The Container Store has 72 stores and they believe they can hit the 500 store mark just in the US alone, so that is 18 years of runway if they are growing their store count at about 12% a year. In addition, they have some other big growth strategies that are underway right now and will be completely rolled out throughout their chain by the end of the year.

So even though the market seems to be bearish on it right now, there is a lot of negativism because of some weather and some sort of short term issues, I think this is a unique product. The consumers love this product. The employees are happy. They get paid more than the average retail employee and they are selling a unique product.

Important Disclosure Information

Chip Skinner is a Portfolio Manager of Royce & Associates, LLC, investment adviser to The Royce Funds, and serves as portfolio manager for Royce Smaller-Companies Growth Fund. The thoughts and opinions expressed in the video are solely those of the person speaking as of September 28, 2015 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.

Percentage of Fund Holdings as of 9/30/15 (%)

  Container Store (The)
Smaller-Companies Growth 3.75

There can be no assurance that any of the securities mentioned in this piece will be included in these portfolios in the future. References to specific securities in this piece are not intended as recommendations and should not be relied upon as the basis for anyone to buy, sell, or hold any security.

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 The prospectus includes investment objectives, risks, fees, charges, expenses, and other information that you should read and consider carefully before investing.

Royce Smaller-Companies Growth Fund invests primarily in small-cap and mid-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.) In addition, as of 9/30/15 the Fund invested a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any of these stocks would cause the Fund’s overall value to decline to a greater degree. 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.)

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