Royce Investment Partners revealed earlier this week it boosted its stake in Intevac Inc. (IVAC, Financial) by 3.86%.
The New York-based firm, which was founded in 1972 by Chuck Royce (Trades, Portfolio), specializes in small-cap companies. The portfolio management team picks stocks based on an active, bottom-up, risk-conscious and fundamental approach. They also search for value opportunities among companies trading at a discount to enterprise value.
According to GuruFocus Real-Time Picks, a Premium feature based on 13D, 13G and Form 4 filings, the firm picked up 96,698 shares of the industrials company on March 31. The transaction had an impact of 0.01% on the equity portfolio. The stock traded for an average price of $7.33 per share on the day of the purchase.
It now holds a total of 2.6 million shares, which occupy 0.20% of the equity portfolio. GuruFocus estimates the firm has gained 19.95% on the long-held investment.
About Intevac
Founded in 1991 as a spinoff from Varian Associates, the Santa Clara, California-based company develops and manufactures high-productivity, thin-film deposition systems and equipment, which is used for making hard-disk drives.
Intevac is composed of a single business segment, which generated $35.8 million in revenue in 2022.
The company went public in 1995.
New TRIO partnership
In December, Intevac announced it had created a new revenue opportunity through a joint development agreement with an undisclosed provider of glass and glass ceramic materials.
While the specific details of the deal remain confidential, it includes a five-year period of exclusivity for this customer, which will use the company’s TRIO platform for consumer electronics applications. Further, it guarantees an estimated $100 million in system revenue over the course of the partnership.
President and CEO Nigel Hunton commented on the transaction, calling it a “key turning point” in the company’s future growth trajectory.
“For decades, Intevac has provided the materials science expertise and high-productivity manufacturing platforms that have deposited ultra-durable and highly-precise coatings onto several billion glass substrates in the hard drive industry,” he said. “Our expertise in producing rugged and highly-precise coatings in high-volume manufacturing environments is well-suited to enable mass production of thin film technologies for the consumer device market.”
Financial review
The partnership may indeed have come at a good time. In February, Intevac reported its financial results for the fourth quarter and fiscal 2022.
For the three months ended Dec. 31, the company posted $11.3 million in revenue, which was down from the prior-year quarter’s $15.9 million. It also recorded a net loss of $3.2 million, or 12 cents per share. In the same period last year, it saw net income of $43.5 million, or earnings of $1.77 per share.
As for the full year, Intevac published a net loss of $17.1 million, or 68 cents per share, on $35.8 million in revenue. Both figures were down from 2021.
Despite seeing a slowdown from 2021, the company noted it still exceeded its performance objectives for the year due to progress in its HDD business.
In a statement, Hunton commented on the “great finish to 2022.”
“The record level of orders and backlog for our HDD business in 2022 established a solid foundation for growth for the next several years, and we look forward to gaining momentum in both businesses in 2023 in order to position Intevac for a major growth year in 2024, which is when we expect to return to a full year of profitable and cash-flow positive results,” he said. “We will continue to maintain a strong balance sheet as we make the necessary investments for transformational growth ahead.”
Intevac will report its first-quarter results on May 3.
Valuation
The company has a $191.32 million market cap; its shares were trading around $7.43 on Thursday with a price-book ratio of 1.54 and a price-sales ratio of 5.23.
The GF Value Line suggests the stock is significantly overvalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 50 out of 100, the GF Score also indicates the company has poor performance potential. While it received a high rating for financial strength, the profitability, growth, GF Value and momentum ranks were low.
Intevac also has a predictability rank of one out of five stars. According to GuruFocus research, companies with this rank return an average of 1.1% annually over a 10-year period.
Guru interest
Of the gurus invested in Intevac, Royce’s firm has the largest stake by far with 10.08% of its outstanding shares.
Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Mario Gabelli (Trades, Portfolio)’s GAMCO also have positions in the stock as of the fourth quarter.
Portfolio composition and performance
Royce Investment Partners’ $9.57 billion equity portfolio, which the 13F filing showed was composed of 912 stocks as of the end of fourth-quarter 2022, is most heavily invested in the industrials, technology, consumer cyclical and financial services sectors.
Other industrial products stocks the firm was invested in as of Dec. 31 included Kadant Inc. (KAI, Financial), Lincoln Electric Holdings Inc. (LECO, Financial), John Bean Technologies Corp. (JBT, Financial), Enovis Corp. (ENOV, Financial) and Encore Wire Corp. (WIRE, Financial).
The Royce Premier Fund returned -15.46% in 2022, slightly outperforming the S&P 500 Index’s return of -18.11% and the Russell 2000’s -20.40% return.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
