Royce Premier Fund, managed by Royce Investment Partners (founded by Wall Street legend Chuck Royce), has revealed which holdings contributed and detracted the most from the portfolio’s third-quarter performance. The mutual fund invests in small caps with low debt and stable cash flows. Overall, the third quarter, according to co-lead portfolio managers Lauren Romeo and Steven McBoyle, was “somewhat disappointing.” In the period, the small-cap-tracking Russell 2000 index gained 9.3%, while Royce Premier Fund added just 5.4%. Despite the underperformance, Romeo and McBoyle are “very pleased” with the fund’s long-term results.
Biggest contributor: Colliers International
Colliers International, with a market capitalization of $7.8 billion, made the biggest contribution to the third-quarter performance. The company provides an array of commercial real estate services, including property management, leasing, valuation, and consulting. It also operates in the capital markets, managing assets for private investors, among other things.
The company has high recurring revenue (up 5% year over year to $2.1 billion in the first half of 2024), a clear business model, a high level of insider ownership, and serves large markets, McBoyle noted.
In July, Colliers acquired a controlling interest in Canada’s Englobe, which specializes in inspection and environmental services. Englobe, in the words of McBoyle, provides much-needed scale to this high recurring revenue business line of Colliers. He further described Colliers as a “well-established business with distinct competitive advantages” and strong reinvestment opportunities.
According to MarketWatch, six out of the eight analysts covering Colliers recommend buying the stock, while two rate it a “hold.” Their average target price is $158.30 per share, implying modest upside of 2%.
Biggest detractor: MKS Instruments
MKS Instruments, with a market capitalization of $6.8 billion, took the biggest bite out of the Royce Premier Fund’s results for the third quarter. In the period, MKS stock dropped nearly 17%. The company supplies components and subsystems to semiconductor and electronics manufacturers, including generators, pressure transducers, and vacuum isolation valves. It also sells chemicals used in advanced electronics manufacturing.
MKS shares had rallied in the first half of 2024 amid expectations of growth in the semiconductor memory sector, but most semiconductor stocks subsequently stalled, noted Romeo. She believes the downturn to be temporary and reiterated Royce’s “strong long-term confidence” in MKS.
According to MarketWatch, nine of the 14 analysts covering MKS have “buy” recommendations, while five rate it a “hold.” Their average target price is $136.70 per share, 35% above the last closing price.
