RMT: Economic Factors Warrant Caution (Rating Downgrade)

Binary Tree Analytics
5.12K Followers
(7min)

Summary

  • Royce Micro-Cap Trust downgraded from 'Buy' to 'Hold', due to macroeconomic concerns, including tariff wars and high interest rates impacting small businesses.
  • RMT focuses on small and micro-cap equities, with an average market cap of $684 million and a Price/Book ratio of 1.8x.
  • Tariff wars and sticky inflation have caused a -15% drawdown in RMT, highlighting the fund's vulnerability to economic instability.
  • Despite elements of undervaluation, the uncertain macro environment necessitates a cautious 'Hold' rating for RMT.

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Thesis

We last covered the Royce Micro-Cap Trust (NYSE:RMT) in the beginning of 2024, with a 'Buy' rating. The CEF is an equity one, covering small capitalization stocks. After our rating, the name proceeded to post an outstanding 14% return during 2024:

This article was written by

5.12K Followers
With an investment banking cash and derivatives trading background, Binary Tree Analytics ('BTA') aims to provide transparency and analytics in respect to capital markets instruments and trades. BTA focuses on CEFs, ETFs and Special Situations, and aims to deliver high annualized returns with a low volatility profile. We have been investing for over 20 years after obtaining a Finance major at a top university.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of RMT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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