article 04-27-2017

Bill Hench on Asset TV's Small-Cap Masterclass

Portfolio Manager Bill Hench on current opportunities in tech, the potential impact of GDP growth on small-caps, and how his portfolios are built "name by name." 

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Portfolio Manager Bill Hench joined Asset TV's Small-Cap Masterclass on April 11 to discuss what is driving small-cap's performance and what's next for the asset class.

Commenting on the potential impact of expansionary fiscal policy, Bill said, "U.S. GDP is the driver of our earnings. Most of our companies are the ones paying the really high tax rate that you read about. So they pay the higher rates here. If you get some sort of investment tax credit, that would be wonderful. But if you speak to a lot of the companies that come in to visit us, they're looking forward to some sort of normalcy, right. So there's an optimism but I think it's justifiable."

Bill also talks about investing in the technology area and describes current activities in the space as the biggest build out since the creation of the Internet, saying, "For the first time in a long time you have a situation where you’ve got multiple things happening that are driving demand. Specifically, you have a build out of private and public clouds. You’ve got autonomous driving, artificial intelligence, you’ve got a semiconductor business being built from the ground up in China. And what’s happening is that it just eats up a tremendous amount of chips, connectors, passive devices, active devices, everything that goes into that little box. And the spending is astronomical. So profitability is really driven by unit volume. And the unit volume has been terrific."

Closing the segment, Bill described his investment approach and why patience is important: "Our objective is over time, and we’ve been doing this a long time, is to get you paid for the risk. So in bad markets we’re not going to get defensive and in point of fact, we’ll be down with our index or probably worse. So if you look over the long term we tend to get paid for the risk."

Watch Asset TV's Small-Cap Masterclass here.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of April 11, 2017 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.

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.) 

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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