Look to Micro-Caps for Bargains: Bill Hench on CNBC's "Power Lunch"
article 09-17-2015

Look to Micro-Caps for Bargains: Bill Hench on CNBC's "Power Lunch"

Portfolio Manager Bill Hench talks about why he believes many stocks, especially those tied more closely to the domestic economy, currently sport attractive valuations and significant growth potential.

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"As far as cheapness goes, you're at a great time right now," said Portfolio Manager Bill Hench about the current state of the smaller-company universe on CNBC's September 14, 2015 broadcast of "Power Lunch."

"If you look at the value part of the Russell 2000 you'll see that it's dramatically underperformed, there are terrific bargains, whole sectors haven't participated, and that concentration in biotech has really left a lot of names with very good values."

By the end of August, small-cap stocks dropped more than 5%. For the year-to-date period ended the same month, the only positive sector was Health Care, an area in which Bill's portfolios are well underweight relative the small-cap index.

Instead, Bill sees more opportunity in cyclical areas of the micro-cap and small-cap market that are poised to benefit from a strengthening domestic economy, such as consumer-related stocks and non-residential construction, which has already begun to turn around. Additionally, Bill's interview also includes four holdings, two of which from this latter group.

"No price is too low," said Bill in "Small cap playbook: The cheaper the better," a companion piece to his video interview. "We buy burning stuff where the problems can be reasonably turned around within a year to two-and-a-half year time frame."

Bill Hench joined the firm in 2002 and has 23 years of investment industry experience. He serves as portfolio manager for Royce Opportunity Fund (with lead portfolio manager Buzz Zaino) and Royce Micro-Cap Opportunity Fund. He also serves as an assistant portfolio manager for Royce Low-Priced Stock Fund.

Read the full article at CNBC.com

Important Disclosure Information

Bill Hench is a Portfolio Manager of Royce & Associates, LLC, investment adviser to The Royce Funds. He serves as portfolio manager of Royce Micro-Cap Opportunity Fund and Royce Opportunity Fund. He also serves as assistant portfolio manager of Royce Low-Priced Stock Fund. The thoughts and opinions 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. Investments in securities of small-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (Please see "Primary Risks for Fund Investors" in the prospectus.) Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 is an unmanaged, capitalization-weighted index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

Percentage of Fund Holdings as of 6/30/15 (%)

  Commercial
Metals
Company
General
Cable
Corporation
Microsemi
Corporation
Interface, Inc.
Micro-Cap Opportunity 0.00 2.66 0.00 0.00
Opportunity 0.94 0.90 0.95 0.83
Low-Priced-Stock 0.00 0.73 0.00 0.00

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

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