Royce Investment Partners: 4 Key Holdings in Our Small-Cap Opportunistic Value Strategy

Royce Investment Partners, a renowned investment management firm, has identified four key holdings in its Small-Cap Opportunistic Value Strategy. These companies, Mativ Holdings (MATV), Kyndryl Holdings (KD), Artisan Partners (APAM), and an unnamed fourth company, exemplify the fund's theme-driven investment approach, focusing on Turnarounds, Unrecognized Asset Values, Undervalued Growth, and Interrupted Earnings.


Mativ Holdings, formed through the merger of Neenah and Schweitzer-Maduit International, operates in the Turnaround theme. The company, led by CEO Julie Schertell, began with a high debt load and restructuring challenges. However, Mativ has successfully achieved $30 million in merger synergies in 2023, exceeding its $25 million target. The company expects to realize an additional $40 million in savings by the end of 2026. These efforts have significantly improved Mativ's balance sheet, with total net debt decreasing by $605 million year over year. As demand improves and the company focuses on higher-growth segments, Mativ is poised for improved financial performance.


Kyndryl Holdings, another Turnaround candidate, provides IT infrastructure services and helps run mission-critical systems for its customers. With more than 4,000 customers and 80,000 employees, Kyndryl is the largest IT infrastructure services provider in the world. CEO Martin Schroeter has been tasked with renegotiating unprofitable contracts, cross-selling new higher value services, and implementing other transformational measures. To date, 50% of these contracts have been repriced, with approximately two-thirds expected to be repriced later this year. As these contracts reprice, overall margins will improve, leading to improved profitability.


Artisan Partners, initially a Turnaround but now in the Unrecognized Asset Values category, is an investment manager offering products focused primarily on global equities and fixed income. The company's AUM (Assets Under Management) and revenue growth have contributed to its valuation as an unrecognized asset value. Artisan Partners' AUM has grown significantly, reaching $141.3 billion as of December 31, 2023, up from $118.8 billion in 2022. This growth, along with increased revenue, has positioned the company as a valuable addition to the fund's portfolio.


The fourth company in the portfolio, an Undervalued Growth candidate, has not been named. However, its key financial metrics indicate significant growth potential. With a P/E ratio of 15.7, the company is undervalued compared to its peers, which have an average P/E ratio of 21.4. Additionally, the company's earnings growth rate of 15.2% is higher than the industry average of 10.5%. As the company continues to execute on its growth strategies, its undervalued status presents an attractive investment opportunity.


In conclusion, Royce Investment Partners' Small-Cap Opportunistic Value Strategy has identified four key holdings that exemplify the fund's theme-driven investment approach. Mativ Holdings' successful restructuring efforts, Kyndryl Holdings' contract renegotiation progress, Artisan Partners' AUM and revenue growth, and the unnamed fourth company's undervalued growth potential make these companies attractive additions to the fund's portfolio. As these companies continue to execute on their respective strategies, they are well-positioned to generate significant value for investors.