article 09-08-2016

Bill Hench on Asset.tv's Small-Cap Investing Masterclass

With the Russell 2000 outperforming the large-cap S&P index so far in 2016, Portfolio Manager Bill Hench joins Asset.tv's Small-Cap Investing Masterclass and shares areas of interest in the small-cap space.

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"To us the most important thing is what you do when things aren't working for what your part of the market is," said Portfolio Manager Bill Hench on Asset.tv's Small-Cap Masterclass.

On September 6, 2016, Portfolio Manager Bill Hench was one of four panelists on Asset.tv's "Small Cap Investing" Masterclass, and discussed the prospects for small-caps in the future.

Regarding potential continued outperformance, Bill said: "I think it's easy to create a scenario where you could continue to see strength in small caps, and they could continue to outperform this year and into next year. Precisely because of what we've all been talking about, right. You've got a friendly interest rate environment, even if there are a couple of increases going forward, you've got great commodity prices, despite complaining, employment gets better, housing is good, autos are good."

Bill discussed where he sees opportunities in the small-cap space today, the sectors he's looking at, and his thoughts on current M&A activity, "We have had our most success with non-residential construction. We're also involved in residential construction; we’ve started to buy some energy as well. And we tend to go name, by name, by name."

Explaining his approach to small-cap investing, Bill said, "We're really buying turnarounds. We're buying asset plays and buying companies that came public at a nice lofty evaluation that had pulled back and still are growing, but maybe in the short term are having some problems. So we like to buy things that are very, very cheap. And we tend to hold onto them for a long time as they fix themselves. Because what we found over a really, really long period of time is that if you could buy these things when they're either not doing well, not generating a lot of cash and sell them as they start to generate significant cash, you tend to get a lot of the stock's performance.

Bill Hench has 24 years of investment industry experience. He joined Royce in 2002.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of August 23, 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.

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 Index is an index of domestic small-cap stocks that 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.

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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