Jay Kaplan on CNBC: Small-Cap Stocks with Big Potential
article 10-16-2015

Jay Kaplan on CNBC: Small-Cap Stocks with Big Potential

Portfolio Manager Jay Kaplan talks about some small-cap companies that exemplify what he likes to see in his portfolio holdings.

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On October 14, 2015, Portfolio Manager Jay Kaplan talked with CNBC "Power Lunch" host Melissa Lee about some small-cap companies that he currently likes, including DSW and Brocade Communications Systems.

"It hasn't had a multiple this low for a while," said Jay about footwear and accessories retailer DSW, believing that the company's investments in omnichannel retailing—an effort to improve business while it waits for another fashion cycle in women's shoes—has temporarily depressed profits. "Once we start to cycle through that, there's great opportunity for margin improvement," Jay added.

Additionally, Jay detailed why he likes Brocade Communications Systems. "They've committed to return 60% of their free cash flow back to their investors, so you have about a 1.5% dividend yield," said Jay. "They have a $1 billion buyback program on a $4 billion market cap, so that's kind of interesting."

Jay Kaplan has 27 years of investment industry experience, 15 of which at Royce. He is co-portfolio manager of Royce Total Return Fund and Royce Dividend Value Fund (with Chuck Royce) and the portfolio manager of Royce Small-Cap Value Fund and Royce Capital Fund—Small-Cap Portfolio. He is also an assistant manager of Royce Pennsylvania Mutual Fund.

Important Disclosure Information

Jay Kaplan is a Portfolio Manager of Royce & Associates, LLC, investment adviser to The Royce Funds. He serves as portfolio manager for Royce Total Return Fund, Royce Dividend Value Fund, Royce Small-Cap Value Fund, and Royce Capital Fund—Small-Cap Portfolio. He also serves as assistant portfolio manager of Royce Pennsylvania Mutual 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. There can be no assurance that a company that currently pays a dividend will continue to do so in the future.

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.)

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

  DSW Cl. A Brocade Communications Systems MYR Group
Total Return 0.62 0.61 0.00
Dividend Value 0.66 0.66 0.00
Small-Cap Value 2.57 2.82 2.42
Capital Small-Cap 2.12 2.33 1.64
Pennsylvania Mutual 0.34 0.37 0.32

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.

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