NEW YORK, Oct. 21, 2014 /PRNewswire/ -- In an investor forum held by Legg Mason the day after the U.S. stock market's most recent "correction," one of the leading equity experts with Legg Mason's investment subsidiaries advised against panic – to stay the course, and seize upon buying opportunities created by anxiety.
"The world is not coming to an end," said Chuck Royce, CEO of Legg Mason affiliate Royce Funds and one of the acknowledged pioneers of small cap investing. "Small caps have been in a steeper correction than most of the market. At times like these opportunity expands. Even a minor correction creates a huge opportunity in our view."
Still, previous market downturns have taught Mr. Royce lessons he uses to avoid trouble in turmoil.
"I'm cautious when I see valuations that are too good," he warned. "Cheapness is an element of the problem and can lead to traps."
His well-known investment philosophy emphasizes value. "The team and I like simple business models," he said. "We tend to avoid a lot of leverage. We can miss big turnarounds," but Mr. Royce and his team, "prefer to think of ourselves as risk managers rather than value investors. With small caps, we want to look far down the road and use a lot of techniques to assess the right value."
"We added money to our existing positions on high-conviction stocks," Mr. Royce said. "Markets always fluctuate. I am optimistic about both the economy and the marketplace."
He suggested human nature plays a role in the recent volatility.
"Corporations are human constructs, and like all humans the inclination is to build," Mr. Royce said. At the same time, he believes corporate managers can be overly conservative in times of turmoil. "They often drive their bus looking in the rearview mirror to past financial crises."
As a highly seasoned asset manager his approach can be different.
"We are always looking at short-term variables," Mr. Royce explained. "Our real business is time arbitrage. What we want is high conviction on stocks that are compounding machines. Most of the time we're looking ahead."
Mr. Royce and his team are renowned for their success in actively managing equity portfolios with a long-term perspective. That strategy does not change when markets fall.
"I very much like having a long-term attitude," he said. "We examine stocks as if we want to own the whole company, the way a private equity owner would. Our emphasis is on sustainability, and we want to be known by our investors for that discipline."
About Chuck Royce
Charles M. Royce is known as one of the pioneers of small-cap investing. He has been the CEO of Royce & Associates, LLC since 1972. Prior to that, he served as the Director of Research at Scheinman, Hochstin, Trotta and as a security analyst at Blair & Co. Mr. Royce holds a bachelor's degree from Brown University and an M.B.A. from Columbia University.
About The Royce Funds
For more than 40 years, Royce & Associates, investment adviser to The Royce Funds, has used a disciplined, value-oriented approach to select micro-cap and small-cap companies. Royce manages approximately $38 billion in total assets under management as of June 30, 2014.
About Legg Mason
Legg Mason is a global asset management firm with $708 billion in assets under management as of September 30, 2014. The Company provides active asset management in many major investment centers throughout the world. Legg Mason is headquartered in Baltimore, Maryland, and its common stock is listed on the New York Stock Exchange (symbol: LM).
All investments involve risk, including loss of principal. Past performance is no guarantee of future results.
Equity securities are subject to price fluctuation and possible loss of principal. Small-cap stocks involve greater risks and volatility than large-cap stocks.
©2014 Legg Mason Investor Services, LLC, member FINRA, SIPC. Legg Mason Investor Services, LLC and Royce and Associates are subsidiaries of Legg Mason, Inc. TN14-459
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SOURCE Legg Mason, Inc.