Jay Kaplan on The Street: A Contrarian Approach to Stock Selection
article 09-14-2015

Jay Kaplan on The Street: A Contrarian Approach to Stock Selection

As a contrarian investor, Portfolio Manager Jay Kaplan seeks to manage the risks of being out of sync with the market by focusing on business fundamentals and having a long-term investment horizon.

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On September 8, 2015, Portfolio Manager Jay Kaplan sat down with Gregg Greenberg of The Street for an in-depth discussion on several holdings in Royce Small-Cap Value Fund which Wall Street has discounted.

As a contrarian investor, Jay seeks to manage the risks of being out of sync with the market by focusing on business fundamentals and having a long-term investment horizon. "We look for companies with really strong balance sheets, we look for companies that earn high returns on capital, and, number three, we do look for companies when they sell at a discount; when they're on sale," said Jay.

Low expectations, particularly those driven by short-term headwinds and, in turn, irrational sentiment, can create opportunities to buy what Jay believes to be superior businesses at unreasonably low valuations. For Jay, a strong balance sheet—characterized by little to low leverage—as well as a surplus of cash can help a company weather temporary setbacks.

Jay Kaplan has 27 years of investment industry experience, 14 of which at Royce. In addition to Royce Small-Cap Value Fund, Jay is the co-portfolio manager of Royce Total Return Fund and Royce Dividend Value Fund (with Chuck Royce) and the portfolio manager of Royce Capital Fund—Small-Cap Portfolio. He is also an assistant manager of Royce Pennsylvania Mutual Fund.

Important Disclosure Information

The thoughts expressed in this piece are solely those of the person 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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. In addition, as of 6/30/15 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.(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.)

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