Charles Royce Quotes
103 Charles Royce Quotes
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[In December 2008] In the whole spectrum of the stock market, there hasn’t been a single zone of safety other than cash.
Charles Royce
[In December 2008] Cash is a funny animal today. It pays you nothing or negative… It’s a very funny moment to be in where cash pays nothing.
Charles Royce
[In December 2008] I’m embarrassed to say we lost a lot of money. We lost around 30 to 50%, depending on which fund, for our funds from their peak in July of ’07 until a few weeks ago. The low was Nov 20. And it was in the neighborhood of 40 to 50% across the board.
Charles Royce
[In December 2008] We have a risk adverse mentality.
Charles Royce
[In December 2008] Systematic risk was not on my radar screen. When this started, August of last year had its high volatility moments. This whole subprime and packaging of securities and the unwinding of some of that, I thought, would just unwind. It would not move onto to the entire financial structure. I just didn’t see that, nor do I think about that all the time. But I did not assume we would have the kind of systematic risk that developed quickly in the spring.
Charles Royce
[In December 2008] Margin of safety, it’s a wonderful set of words because it implies that you should be spending your time on the risk factor in a company.
Charles Royce
[In December 2008] The balance sheet is critical. Balance sheets mean that you probably are minimizing debts, that the company should have sufficient returns on assets to grow on their own without leverage. What you don’t want is highly leveraged; high ROE companies that where the slightest little bad wind can change everything overnight.
Charles Royce
[In December 2008] We have too many banks. Somebody told me we have 8,000 banks out there… Most countries don’t have anywhere near the number of banks we do.
Charles Royce
[In December 2008 on bonds.] I have begun a systematic short of that particular instrument. I just don’t see how it’s possible that with the dollar at risk over long periods of time, with our highly inflationary money supply creating an environment that we can hold those rates. We know we can control short-term rates. That’s easy. That’s the Fed’s job. But the long-term rates are controlled by the world. And will the world let us get away with that? I would doubt it.
Charles Royce
[In December 2008] Modest inflation is always a good idea… High inflation… is very disruptive.
Charles Royce
[In December 2008] I definitely think equity investment is a very important way of protecting against inflation, a very important way of compounding wealth, and that absolutely will continue.
Charles Royce
[In December 2008 on financial scandals. Bernard] Madoff is extraordinary. I mean, the book obviously hasn’t been written yet. But it’s going to be an interesting book.
Charles Royce
[In December 2008] Use the old-fashioned thing, dollar cost averaging. I don’t know what the bottom is. When we get interested in a stock, we don’t say, ‘We have to buy all our stock this day, this price.’ We dollar-cost average into all our positions. So it’s a very time-tested technique. You’re going to get some bad prices. And you’ll get some good prices…
Charles Royce
[In June 2011 on diversification versus concentration in small cap’s.] One must… remember that small-caps tend to be more fragile entities and therefore subject to ‘out-of-left field’ occurrences that may have detrimental effects on their business. Because of this, we would argue that a higher level of diversification is appropriate.
Charles Royce
[In June 2011.] We want companies with low leverage and the ability to survive difficult times for their industry or sector.
Charles Royce
[In January 2012.] I’d like to know who actually came up with that ridiculous phrase risk-on, risk-off.
Charles Royce
[In February 2012.] A company is a dynamic compounder of wealth. It can make the adjustments to inflation, to deflation, to recession, to prosperity. It can make those adjustments for you in a way that allows the return on equity to continue. And the return on equity lets you compound your money…
Charles Royce
[In February 2012.] I would say approximately daily volatility has tripled in the last five to ten years, from a base of the early part of the decade to currently.
Charles Royce
[In February 2012 on High Frequency Trading and associated systems.] I think they have created much higher daily volatility, and there's no question that has contributed to people’s anxiety. In the long run, I don't think daily volatility is going to interrupt the long-term returns, but it sure doesn't feel good.
Charles Royce
[In February 2012.] Who isn’t a value manager?… We believe we’re a risk manager.
Charles Royce
[In February 2012.] We want to look at the risk of the portfolio as a whole. We want to look at the risk of the enterprise we’re looking at. We want to look at their strategy risk. We want to understand their business model and how it all plays out in their niche. We want to look at the balance sheet.
Charles Royce
[In February 2012.] These are younger companies. They're smaller companies. They're, by definition, more fragile. And you don’t want to compound the exogenous kinds of activities that go on in their world with balance sheet risk. If you put the two together, it's a firecracker.
Charles Royce
[In February 2012.] Small cap stocks have always had higher volatility. They have higher volatility to this day.
Charles Royce
[In February 2012.] You should expect higher returns… If you don't expect higher returns, you shouldn't use small cap stocks.
Charles Royce
[In February 2012.] We prefer kinds of financial service companies that don’t have that asset liability complication, which money managers do not. Money managers get paid frequently, they get paid quarterly. There's not a receivable problem. They don’t have inventories. They have relatively high margins. They're simpler businesses. So we’ve always looked at them, and we will have some in our portfolios at all times.
Charles Royce
[In February 2012.] Small companies acquire their competitors, they acquire their smaller companies. So M&A is a constant activity in the small comp world, in a positive way.
Charles Royce
[In February 2012.] Ultimately we buy when things are illiquid. We are buyers into that illiquidity moment. We expect that the company, as it prospers, to generate more liquidity. So over time, we will be buyers when it's illiquid and sellers when it's highly liquid. We are going to take advantage of the illiquidity. Illiquidity is another risk factor. And we want to be compensated for it.
Charles Royce
[In February 2012.] Dividends are a wonderful marker of quality. It is the strongest attribute of quality.
Charles Royce
[In April 2013.] Royce & Associates is an investment adviser, focusing on smaller companies domestically and internationally, primarily through mutual funds.
Charles Royce
[In April 2013.] Value investing is an overused word with multiple meanings… For us, it means focusing on risk throughout the investment process – from balance sheets to valuation to paying the appropriate price. To us, risk is as important as reward.
Charles Royce
[In April 2013.] Risk is a major part of our daily discussion, and through that lens banks are extremely difficult to analyze today. Banks have not been in our sweet spot. It’s very difficult to know the status of their balance sheets, the value of their investments, and it’s very difficult to know what the appropriate use of leverage should be in any circumstance.
Charles Royce
[In April 2013 on investing in banks.] We prefer capital markets, service companies, leasing companies, insurance brokers and other specialized niche companies. We’re the nonblank financial services fund.
Charles Royce
[In April 2013 on the capital markets area within financials.] Many times over the past several years, money managers have been trading at extremely attractive valuations. They are not capital-intensive. They are a classic service business. They’re customer-centric and product-centric. The fees have relatively high margins. Many have solid, underleveraged balance sheets, so they can afford to pay dividends. They are currently underappreciated in the investment spectrum, largely because markets remain extremely risk-adverse.
Charles Royce
[In April 2013.] The investment universe of small companies is both large and diverse. Small-cap equities form the largest domestic equity universe, accounting for approximately 82% of all publicly traded companies in the U.S. The universe includes more than 4,100 companies…
Charles Royce
[In April 2013.] Our selection process does focus on risk.
Charles Royce
[In April 2013.] We very consciously, intently, look for good risk/reward combinations. We look for stocks where our downside risk is less, perhaps a modest 10% or 15%, and the upside is substantial, such as 100%. We start out with that equation in mind… When it comes together, it typically delivers better downside performance.
Charles Royce
[In April 2013 on banks and the GFC.] We were fortunate not to own banks. Now, banks have done pretty well on the way up. I’m sure we’ve missed our fair share of that. But it’s just not something I’m comfortable with, and I don’t believe I could ever end up with the confidence level to make it a significant part of the portfolio.
Charles Royce
[In April 2013.] Risk is inherent in our process and of course we are quite sensitive to valuations. At the same time, we are very careful about trying to invest in companies we can understand.
Charles Royce
[In April 2013.] Risk is built into the process of stock selection and the parallel process of valuation.
Charles Royce
[In April 2013.] The most important thing is not to lose the money. Controlling risk is the single most important job – that’s the hardest part. That’s the part I had to learn through losing other people’s money in ’73 and ’74 and it became a guiding principle for me.
Charles Royce
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