Francis Gannon in Barron’s Discusses Buying Small-Caps at Attractive Prices
article 07-05-2022

Francis Gannon in Barron’s Discusses Buying Small-Caps at Attractive Prices

How are deglobalization and a wide valuation spread helping to create small-cap opportunities?


Co-CIO Francis Gannon was recently featured in Barron’s discussing how many small-caps have already priced in “a lot of recessionary pain,” the potential benefits of deglobalization, small-cap's valuation gap, and more.

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Francis said that small-cap stocks are now trading at a 22% discount to large-caps on an enterprise-value-to-cash-flow basis, a stark difference from their historical premium of 3%. He added that the valuation gap between the two asset classes is as wide as it’s been seen in 20 years.

He said that automated welding equipment company Lincoln Electric was typical of the kind of small-cap business that may be set to benefit from deglobalization. He also believes multinational companies returning to the U.S. will face a need for factory automation that can also be a boon for smaller companies.

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Learn more about Francis Gannon.

Important Disclosure Information

Average Annual Total Returns as of 3/31/22 (%) 

Premier -7.32 -2.73 11.63 10.88 9.62 8.85 10.32 11.53 12/31/91
Special Equity -5.71 2.01 9.03 6.39 7.91 7.55 8.43 8.76 5/1/98
Russell 2000 Value -2.40 3.32 12.73 8.57 10.54 6.91 8.55 10.01 N/A
Russell 2000 -7.53 -5.79 11.74 9.74 11.04 7.99 8.72 9.12 N/A

Annual Operating Expenses: Premier Fund: Gross 1.17; Net 1.17. Special Equity Fund: Gross: 1.20; Net 1.20

1 Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 30 days of purchase may be subject to a 1% redemption fee, payable to the Fund which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at Operating expenses reflect each Fund's total annual operating expenses for the Investment Class as of each Fund's most current prospectus and include management fees and other expenses.

Mr. Gannon’s thoughts and opinions concerning the stock market are solely their own and, of course, there can be no assurance with regard to future market movements. No assurance can be given that the past performance trends as outlined above will continue in the future.

The performance data and trends outlined in this presentation are presented for illustrative purposes only. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements.

Percentage of Fund Holdings As of 3/31/2022 (%)

  Lincoln Electric

Royce Premier


Royce Special Equity


Company examples are for illustrative purposes only. This does not constitute a recommendation to buy or sell any stock. There can be no assurance that the securities mentioned in this piece will be included in any Fund’s portfolio in the future.

Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. All indexes referenced are unmanaged and capitalization weighted. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell 2000 Value and Growth indexes consist of the respective value and growth stocks within the Russell 2000 as determined by Russell Investments. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

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 prospectus.)



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