The Small-Cap Opportunistic Value Strategy that we use in Royce Small-Cap-Opportunity Fund invests in companies that Lead Portfolio Manager Brendan Hartman, Portfolio Managers Jim Harvey and Jim Stoeffel, and Assistant Portfolio Manager Kavitha Venkatraman categorize into four themes: Turnarounds, Unrecognized Asset Values, Undervalued Growth, and Interrupted Earnings. In this piece, they discuss five key holdings in the portfolio—one Interrupted Earnings story, two Unrecognized Asset Value stocks, an Undervalued Growth company, and one Turnaround.

A provider of production optimization solutions to the North American oil & gas industry, Flowco Holdings Cl. A (Nasdaq: FLOC) offers two primary technologies. The first is High Pressure Gas Lift (HPGL) a form of artificial lift used in the first two years of a well’s production, which typically increases the NPV of a well by 10-20%. (“NPV” stands for “Net Present Value,” a financial metric that represents the present-day value of all future cash flows (revenue minus costs) a well is expected to generate over its lifetime beyond the initial investment.) It replaces Electric Submersible Pumps (ESPs), the legacy technology that is subject to long downtimes and high failure rates. The second is Vapor Recovery Unit (VRU), which is a technology that captures methane emitted during oil & gas production. This allows oil & gas exploration & production (E&P) companies to either monetize the methane or use it in their artificial lift operations, thereby generating higher value from natural gas that would have otherwise been vented or flared.

Both of Flowco’s technologies currently have very low adoption rates—less than 10% when we first invested—but are expected to grow to a 25% adoption over the next few years, driven by their quick payback and attractive ROI to E&P companies. Flowco is the market leader in both technologies, with the potential for double digit revenue growth potential and industry leading 40% EBITDA margins.

We became investors of Flowco in 2Q25, when its stock fell significantly from its IPO price, amid deteriorating activity levels amongst domestic oil and gas producers. We see the slowdown in U.S. oil and gas production as a temporary issue, and it should not derail the continued adoption of Flowco’s disruptive technologies given their attractive economics to E&P companies. We therefore took advantage of the share price dislocation to buy a technological disruptor that fits the Strategy’s Interrupted Earnings category.

Flowco Holdings Cl. A (Nasdaq: FLOC)
12/31/24-9/19/25

Past performance is no guarantee of future.

IAC (Nasdaq: IAC) is a digital holding company with a long history of building, restructuring, and spinning off businesses to unlock shareholder value. Its current portfolio includes digital media business, People Inc. (the former Dotdash Meredith, now the largest U.S. digital publisher), and Care.com, the leading online caregiver marketplace, along with minority stakes in MGM Resorts (~24%) and Turo (~32%), plus digital assets such as Vivian Health and Ask Media Group.

This investment has admittedly taken longer than we initially expected to play out, but it’s slotted in our Unrecognized Asset Value category, where we look for companies trading at a steep discount to the underlying value of their assets, with the expectation that the shares will ultimately rise toward our estimate of their intrinsic value. At a roughly $2.9 billion market cap, IAC trades at a significant discount to the sum of its parts: its MGM stake alone is worth around $2.3 billion and holds roughly $800 million in cash, while investors are effectively paying close to nothing for the private businesses—People Inc., Care.com, Turo, Vivian, and Daily Beast—that together generate nearly $360 million in annual EBITDA. IAC’s management has also proven adept at turnarounds. With People Inc. now stabilized and growing again following the challenging Meredith integration, Angi successfully fixed and spun off, and Care.com undergoing a major product relaunch, IAC is positioned to once again pursue M&A-driven growth, supported by ample liquidity and Founder and Chair Barry Diller’s long track record of value creation.

We like IAC in large part because the market is valuing only part of the company’s portfolio, basically giving shareholders like us the rest of its assets for free. With a history of restructuring and monetizing assets, we believe the discount will narrow over time, providing meaningful upside.

IAC (Nasdaq: IAC)
12/31/24-9/19/25

Past performance is no guarantee of future.

Spun out of NCR in 2023, NCR Atleos (NYSE: NATL) operates and services a fleet of ATMs on behalf of both banking and retail customers and its own fleet of independent ATMs, which it owns and operates through the “Allpoint” network. While NCR Atleos’s legacy business model involves selling hardware, software, and services on a modular basis, the company is transitioning its installed base into a turnkey, end-to-end platform branded as “ATM as a Service” (ATMaaS). A structural shift in consumer preferences to self-service banking is accelerating the adoption of ATMaaS. ATMs are gaining share from bank tellers by allowing consumers to do more than just withdraw money—many now allow users to deposit funds, pay bills, and perform other transactions.

The complexity of managing an ATM fleet is thus increasing, causing NCR Atleos’s customers to switch to the ATMaaS model. NCR Atleos’s ATMaaS business has been growing by 20%+, and management expects roughly 25% of its ATM fleet to have transitioned from the legacy business model to ATMaaS over the next few years—which would result in a sizable high-margin recurring revenue stream for NCR Atleos. The shift in consumer preference from bank tellers to ATM transactions is also driving an ATM Fleet refresh in which legacy machines become multi-functional, which is helping to drive growth in NCR Atleos’s hardware revenues, reversing a trend following several years of hardware revenue declines.

We see NCR Atleos as a classic Unrecognized Asset Value play, where management is trying to better monetize its assets via a change to its business model. We began building our position in NCR Atleos in late 2024 when it seemed that investors underappreciated the margin accretive shift in NCR Atleos’s business model, as well as the brighter prospects for its hardware revenues. We also observed that investors were not giving the company credit for its superior free cash flow generation and commitment to reducing its debt level. While our investment in NCR Atleos has performed well so far, we will continue to hold our position until the business transformation is more fully reflected in NCR Atleos’s market value.

NCR Atleos (NYSE: NATL)
12/31/24-9/19/25

Past performance is no guarantee of future.

Perella Weinberg Partners Cl. A (Nasdaq: PWP) is a global independent advisory firm that provides strategic and financial advice in several areas, including mergers & acquisitions, restructuring, liability management, capital markets, and most recently, private funds advisory via its acquisition of Devon Park Advisors. The firm differentiates itself with a “workshop” model focused on high-value, client-centric mandates rather than a volume approach.

We began building our position around the midpoint of 2023 when the shares were trading in the mid-single digits. At that time, investor sentiment was deeply negative as global deal activity slowed, creating skepticism around boutique advisors like PWP. Our thesis, however, was that PWP’s expanding platform, strong recruiting momentum, and diversified service mix would translate into outsized growth once market activity normalized. This thesis is now playing out: the firm has delivered revenue stability so far in 2025 despite tough comparisons, while leading indicators such as backlog and engagement count are at record levels. Consensus estimates now call for 27% revenue growth next year, driven by improved deal activity and the broadening of the company’s platform, placing PWP squarely within our Undervalued Growth category.

Perella Weinberg Partners has been trading at a discount to peers such as Evercore, Moelis, and PJT Partners—roughly 9-10x forward EV/EBITDA (enterprise value over earnings before interest, taxes, depreciation & amortization) versus mid-teens to 20x for its competitors—despite higher expected growth given PWP’s record partner hiring and expansion into alternative asset advisory. Management and partners collectively own a substantial portion of the company, ensuring strong alignment with shareholders. Since going public, more than $675 million has been returned through dividends and repurchases, reflecting a disciplined capital allocation philosophy.

With a debt-free balance sheet, significant cash, embedded growth from senior hires, and its recent diversification into private funds advisory, we think PWP is well positioned for earnings acceleration and a potential re-rating closer to its industry peers.

Perella Weinberg Partners Cl. A (Nasdaq: PWP)
12/31/24-9/19/25

Past performance is no guarantee of future.

Spun out of Honeywell in 2018, Resideo Technologies (NYSE: REZI) is a leading provider of home comfort, control, and monitoring systems such as thermostats, leak detectors, and fire safety systems, as well as to residential security devices like cameras and sensors. It also owns a leading wholesale distribution network called ADI. We are long-term shareholders and are seeing the company approaching the end of a turnaround phase.

During the period we have been shareholders, Resideo undertook several years of margin improvement efforts, improving its gross margin by roughly 450 basis points. The successful turnaround is now allowing management to pivot its focus to growing the business. Resideo is also in the process of executing two highly strategic and positive corporate actions: earlier in 2025, Honeywell agreed to eliminate a $140 million annual payment from Resideo for some legacy liabilities that Resideo was burdened with at the time it was spun out. This obligation created a major overhang on Resideo’s stock price and a constraint on Resideo’s ability to invest in growth.

Resideo also announced its intent to spin off ADI in 2026, thereby unlocking the franchise value embedded in ADI, and allowing it to pursue growth and capital allocation priorities independent of Resideo’s home comfort and security business. Although Resideo’s shares have reacted well to these positive announcements, we believe the share price still does not fully reflect the value of both its franchises and their growth potential as separate companies. We plan to hold our position until we see this value fully reflected in Resideo’s share price.

Resideo Technologies (NYSE: REZI)
12/31/24-9/19/25

Past performance is no guarantee of future.

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