Chuck Royce: Finding Investment Opportunities in an Uncertain Market—Royce
article , video 05-23-2022

Chuck Royce: Finding Investment Opportunities in an Uncertain Market

Chuck Royce discusses three companies in which he has high confidence and explains why he thinks investors should remain in the market.


What do you make of all the uncertainty within and outside the market?

Well a lot is going on at once. It is very extreme in a variety of settings, both in the sort of economic front, the inflation front, the interest rate front, and now we have the war front. We have these multiple factors acting in a negative way. Sentiment has clearly gone negative across the board, but I firmly believe that gradually there will be a diminution of these forces, especially on the inflation front.

I can see mild encouragement on the inflation front and interest rates. I feel comforted that we’re not going to be twice this level. I think that everyone understands what we’re doing, and I think it’s working. The stock market coming down is a behavioral force which will slow down investing purchases in the economy. So oddly, the stock market itself can have a positive influence on inflation.

How do you think investors should view the market?

The most difficult decision an investor has to face is how do they stay in the market. I completely believe that wealth creation through equities is a primary path, and I think the most dangerous thing you can do is get out of the market under the expectation, oh, I’ll get back into the market.

I use the example of COVID a couple years ago when the market actually bottomed 12 days after COVID became officially a big deal disease. So oddly you couldn’t have handled that if you were trying to time it, and if you had gotten out, you really couldn’t have handled it. So I’m very, very firm with the idea of staying involved. Continue whatever form of dollar cost averaging you like and stick with the idea that equities are the single best way to compound wealth in this world.

What recent investment opportunities have you been seeing?

Continue to lean towards value, value in the broadest sense, just less higher multiple. It’s not that we’re ever against growth, but we don’t want to pay extreme multiples. We’re leaning away from growth, especially in our large funds that tend to want to do different types of investing, like Penn Mutual.

I’m personally adding to areas that we’ve had good experience with. Transportation is one of them. We are adding to Forward Air. Landstar, just a superb company, and Air Lease. Air Lease is a leasing company to airlines. They are an extraordinary player. They are top notch, and they had activities in Russia, and they immediately took an impairment charge, which I thought was the absolute best way to handle it. As opposed to discussing it for the next five years, they just said it’s over.

Adaptation is key, you can ask that question to managers all day long. You know, are you good at adapting? Everyone’s going to say yes. I mean you’re never going to get the answer. You only see it through action.

Important Disclosure Information

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

  QTD 1YR 3YR 5YR 10YR 15YR 20YR 45YR/Since
Pennsylvania Mutual -9.12 -2.25 12.10 10.62 9.97 7.69 9.10 12.92
Russell 2000 -7.53 -5.79 11.74 9.74 11.04 7.99 8.72 N/A

Annual Operating Expenses: 0.92

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 the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies.

The thoughts and opinions expressed in the video are solely those of the persons speaking as of May 9, 2022 and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.

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 (%)


Forward Air


Landstar System


Air Lease


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.

Sector weightings are determined using the Global Industry Classification Standard ("GICS"). GICS was developed by, and is the exclusive property of, Standard & Poor's Financial Services LLC ("S&P") and MSCI Inc. ("MSCI"). GICS is the trademark of S&P and MSCI. "Global Industry Classification Standard (GICS)" and "GICS Direct" are service marks of S&P and MSCI.

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. The Fund invests primarily in small and micro-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund’s broadly diversified portfolio does not ensure a profit or guarantee against loss. The Fund may invest up to 25% of its net assets in foreign securities that may involve political, economic, currency, and other risks not encountered in U.S. investments.(Please see "Investing in Foreign Securities" in the prprospectusspectus.)



Sign Up