Royce fund names its biggest winner and loser in the second quarter

The portfolio managers of the Royce Small-Cap Total Return fund have named their biggest winner and loser in the second quarter. This fund, like all those associated with Wall Street legend Chuck Royce, invests in small-cap stocks. It focuses on quality companies that pay regular dividends and/or return capital to shareholders.

Healthcare Services Group, which provides services ranging from cleaning and laundry to catering to hospitals, rehabilitation centers, and nursing homes, led the Royce Small-Cap Total Return portfolio in the second quarter, principal manager Miles Lewis said.

In April, reporting for the first quarter, the group posted its best quarterly revenue and cash flow performance in five years, explains Miles. The top line increased 5.7% year over year to $447.7 million, while operating cash flow (excluding a change in payroll accrual) was $32.1 million, compared with negative cash flow in the first quarter of 2024.

Among the reasons for this momentum are the post-pandemic recovery in the nursing home industry, strong retention rates, new customer acquisitions, and opportunities for cross-selling, Miles explained.

On April 23, the day the results were released, the company’s shares surged nearly 30% to $12.19 per share, and gained another 11% the following day, closing at $13.52 per share.

According to a Royce report, Healthcare Services ranked among its top 10 holdings by weight in the second quarter, at 2.6%. The company’s current market capitalization stands at $1.14 billion.

Vestis, which provides uniform rentals and workplace supplies, underperformed other holdings in the Royce Small-Cap Total Return portfolio, manager Joe Hintz said. Shares of the $630 million company plunged nearly 38% in a single day in May when it released results for the second quarter of its fiscal 2025, which ended March 28.

Vestis reported a year-over-year revenue decline of 5.6% to $665.8 million and an operating loss of $8.6 million versus operating income of $43 million for the same period in fiscal 2024. This resulted in negative earnings per share and the cessation of its dividend, Hintz noted. The fund exited the position.

The AI translation of this story was reviewed by a human editor.