article 05-03-2017

Jay Kaplan on Ticker.com: Three Core Principles

Portfolio Manager Jay Kaplan tells Ticker.com how he finds companies for Royce Total Return Fund, and what he likes to see from dividend-paying small-cap companies.

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Portfolio Manager Jay Kaplan is interviewed by Ticker.com, a financial-professional destination for news, information, and product information, for a series profiling mutual funds. Jay discusses Royce Total Return Fund, and how he screens companies in the small-cap universe.

"We actually mean total return, which is why we don't call it high yield, yield, dividend, or any of those terms. We want to emphasize the idea that we are searching for the highest-quality dividend-paying companies we can find—and not the highest yields," said Jay.

Jay commented on the core principles behind the Fund’s investment philosophy: "We think of investing in a company as if we own the whole business. We spend a lot of effort making sure that the businesses in which we invest are financially strong. We want rock-solid balance sheets. Consequently, our first core tenet is financial strength. The second core tenet is to buy good businesses. We measure how good a company is by looking at return on capital and return on assets, and when their returns look higher than those of other businesses—somewhere, somehow, that points to a better mouse trap. The mouse trap might be the industry, the product, the way the company is run, maybe even how it is structured financially. In any event, when you find a track record of high returns, there is a better mouse trap of some kind involved."

Describing his third core tenet, Jay said, "Because we are value-oriented investors at heart and think the price you pay has an impact on the ultimate return, we also are price-sensitive. As a result, the price paid is our third core tenet, which goes back to the idea of owning the whole business."

Read the full interview here.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of April 27, 2017 and may differ from those of other Royce investment professionals, or the firm as a whole.

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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