Wednesday, September 7, 2011

An Interview with Chuck Royce

Small-cap investor Chuck Royce recently responded to GuruFocus readers' questions.

Chuck Royce is the president and co-chief of The Royce Funds.

The Royce Premier Fund (RYPRX) that he manages has an excellent long-term track record returning 10.7% annually over the past ten years.

Top Five Holdings of Royce Premier Fund

-Gartner (IT)
-Lincoln Electric (LECO)
-Unit Corporation (UNT)
-Trican (TCW)
-Nu Skin (NUS)

Here are some short excerpts of Royce's responses:

On how to define high quality for small-cap companies
"It starts with the balance sheet. We want companies with low leverage and the ability to survive difficult times for their industry or sector. We also want to a history of above-average returns on capital over time – our favorite metric is ROIC (return on invested capital)..."

On how much macroeconomic factors matter in the investment process
"We spend very little if any time looking at the world from a macro point of view. It is really an afterthought."

On what kind of companies works better in an inflationary environment
"Companies that have the ability to pass along cost increases. Typically these are companies with strong market niches or industry leadership positions."

Read the full interview here at GuruFocus.

Adam

No positions in stocks mentioned

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