A Frank Look at Royce

12/06/2002 12:00 am EST

Focus:

Walter Frank

CIO, MONEYLETTER

“The best news is coming from the profit front,” says Walter Frank, editor of the MoneyLetter, a service that has followed the mutual fund industry for some 22 years. “Considering everything, the earnings scenario can only improve. If we are right, this is no bear market rally. We will obviously see profit taking, but new lows are not ahead.” The advisor recommends a micro and small cap value fund.

"When Charlie Dreifus came to Royce Funds four years ago and began managing the Royce Special Equity Fund, he came with a distinguished pedigree, as managing partner of Lazard Special Equity fund. That pedigree has only been bolstered by his performance at this fund. Royce Special Equity shareholders have benefited from his nearly 35 years of experience. To wit, this fund is up 13.2% for the year-to-date through November 14. In contrast the S&P 500 has dropped 20.8%. Looking longer term, the fund, in a difficult 3-year environment, has recorded an average annual return of 15.8%. For the trailing year, the fund has advance an amazing 31.4%.

“The fund manager’s value traits fell right in line with Royce Fund’s philosophy. Royce concentrates on small and microcap stocks at prices they believe are below the firms’ true worth. Dreifus adheres to the standard value criteria. He uses a bottom-up approach, emphasizing individual stock selection of macroeconomic trends. Once an interesting company has been found, they look at qualitative considerations, including meetings with management, which are considered extremely important. Dreifus often is led to family-run niche companies, where the insider family owns 20% to 40% of the firm. He also says that many of his investments may seem boring, but they are firms whose businesses are easily understood and are run for the long haul.”

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