Royce Premier Fund PM talks three high-confidence holdings

Lauren Romeo, portfolio manager at the Royce Small-Cap Premier Quality Strategy Fund, has discussed three key holdings that have high long-term confidence. Recall that Royce, founded by Wall Street legend Chuck Royce, specializes in small-cap stocks. The Premier fund selects names that generate high returns on invested capital that the portfolio managers believe have durable business models and reinvestment opportunities. These businesses often have characteristics like recurring revenue and leading market positions, Romeo explains. That’s why, even if their share prices dip, they tend to bounce back and rise over the long term.

Stella-Jones, a Canadian provider of treated wood infrastructure products listed on the Toronto Stock Exchange, already holds a significant share of the U.S. market for utility poles and railroad ties. The fund expects the company’s revenue to continue growing in the long term thanks to increasing infrastructure spending by U.S. utilities and long-term contracts with major existing customers for the replacement of poles and ties. In addition, in May, Stella-Jones acquired Locweld — a manufacturer of steel lattice towers and poles for high-voltage power lines — which expands its addressable market.

One of Arcosa’s key growth drivers is also the rising investment in infrastructure construction. The company sells aggregates — sand, gravel, and crushed stone — which are essential in road, buildings, and bridge construction. It also manufactures utility structures and metal poles. This segment benefits from increased spending to upgrade aging infrastructure, integrate renewable energy sources, electrify transportation, and meet the growing power demand from AI data centers.

JBT Marel, a supplier of food and beverage processing equipment, generates about half its revenue from parts and services related to installed systems. This provides the company with a steady cash flow, even when customers are spending less on new equipment. It also operates facilities and offices across multiple countries, which helps mitigate the direct impact of higher tariffs. Another growth factor is the merger between JBT and Ireland’s Marel, announced on January 3. The deal is expected to deliver cost synergies.