article 01-30-2014

"Our job is to look past the headlines and focus on companies."

Separating macro headlines from the relevant, company-specific micro factors is a daily challenge for us in the firm… it is of course true that big events in politics and the economy exercise a considerable impact… just think of the importance the actions of the Fed and recent interest rate policies have had on company outlooks and valuation trends.

But it's also easy to overstate the effect of headline news and over react to events… our job is to look past the headlines and focus on companies… to estimate their long-term outlook and to ascertain how much attention, if any, the market is paying to the long-term creation of value… I see a very high-quality company as an adaptive compounding machine.

Try this someday—rank the headlines in terms of how relevant you think they are for the market and/or your investments… then look back a year later and see how right or wrong you were.

My own favorite recent example was the government shutdown from this past fall… it sure seemed like a big event at the time… yet it wound up having very little impact on the stock market as a whole or the companies whose shares we hold…

Important Disclosure Information

Chuck Royce is President, Director of Investments, and a portfolio manager of Royce & Associates, LLC, investment adviser for The Royce Funds. Mr. Royce’s thoughts in this piece are solely his own 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. There can be no assurance that Royce will achieve its investment goals or objectives.

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