article , video 06-09-2016

Optimistic About the Small-Cap Market

Portfolio Manager Bill Hench on areas of the small-cap market he is optimistic about against the backdrop of a consumer-driven economy and low interest rates. 

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Optimistic About Small-Caps

There are more than a handful of reasons for my optimism about the market and specifically the small-cap market going forward.

We have for a long time not participated in any of the upside that the S&P has had, that a lot of the big, over-the-counter names, especially in technology, have had. But our companies in this last year and a half have really done what you would expect them to do if you were a manager, or if you wanted a good management team running your business.

They have kept costs down, they have managed their balance sheets very well and they have positioned themselves to really participate in what's been a fairly good U.S. economy.

I think if you combine that with a continued low interest rate environment with a major, major pullback in energy – we often forget that that's a good thing.

You know, you will see in the television programs in the morning and in the papers about - what are we going to do about these low energy prices? What we are going to do is take advantage of them.

It's an economy that is driven by the consumer. It continues to be driven by the consumer and it will be driven by the consumer tomorrow. So we are going to take advantage of those things.

I think also the retail investor has been out of the market. If we just get a little change where people become more active in the market by putting money in instead of taking it out, I think that's going to have a big effect as well.

So there are more things I could talk about but overall I think the stage is really set for this part of the market, the small cap market, to really do well going into '16 and '17.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the person speaking as of April 12, 2016 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. Smaller-cap stocks may involve considerably more risk than larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.)

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