article 04-26-2017

Jay Kaplan on MoneyLife with Chuck Jaffe

Jay Kaplan discusses where he is finding value and companies he currently likes on MoneyLife with Chuck Jaffe.

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Portfolio Manager Jay Kaplan joined financial radio talk show MoneyLife with Chuck Jaffe on April 18, 2017, and discussed the small-cap market.

Remarking on how recent events have impacted the small-cap asset class, Jay said: "The market's had a pretty good run since the Trump election, and small-cap has had a fabulous run… So value is getting a little harder to find, stocks are little pricier, so you have to be a little more careful."

Jay describes his investment approach and what he’s looking for in holdings, "We're looking for three basic things in companies. We're looking for companies that have very strong financials, really strong balance sheets. We're looking for companies that are in good businesses and one of the ways that you figure that out is by looking at return-on-capital or assets for companies who generate above average returns over time and then we're looking at the valuation. We think what you pay makes a difference. We try and think about buying stocks as though we were buying a business in its entirety and that's how we approach it."

Jay highlighted Robert Half International, a staffing business: "An example… is Robert Half. We like dividend payers, particularly in this environment. We think it's really nice to put some money in your pocket along the way, and they're in the white collar staffing business and that business toward the end of last year was a little bit slow, but it looks like things are getting a little bit better."

He also discussed Genworth MI Canada, "Their mortgage business in Canada is actually a really good business and the company sells at about 8.5 times earnings, it's a little bit under book value. It's got a double digit return on equity. It's got a 5% yield. Part of the reason why the stock is so cheap is energy prices. Although they have come off their bottom, they're still nowhere near their highs, a little bit on the low side. They have a long-term track record of returning cash to shareholders in the form of dividends and buybacks when it makes sense, very well run, very solid folks who run Genworth of Canada."

To close out the piece, Jay then gave his thoughts on audience-chosen stocks in the "Hold It or Fold It" segment.

Listen to the entire MoneyLife with Chuck Jaffe segment here.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of April 18, 2017 and may differ from those of other Royce investment professionals, or the firm as a whole.

As of 3/31/17, Robert Half International was 0.0% of Royce Small-Cap Value Fund's assets, 0.5% of Royce Total Return Fund's assets, 0.6% of Royce Dividend Value Fund's assets, 0.6% of Royce Pennsylvania Mutual Fund's assets, and 1.8% of Royce Capital Fund – Small-Cap Portfolio's assets.

As of 3/31/17, Genworth MI Canada was 2.6% of Royce Small-Cap Value Fund's assets, 0.7% of Royce Total Return Fund's assets, 0.6% of Royce Dividend Value Fund's assets, 0.9% of Royce Pennsylvania Mutual Fund's assets, and 2.6% of Royce Capital Fund – Small-Cap Portfolio's assets.

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.

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.)

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