Tieton Capital Management

4700 Tieton Drive, Suite C
Yakima, WA  98908
(509) 965-6488

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March 28, 2018

March 28, 2018 By Lora Leavenworth

Portfolio Change Update

March 28, 2018

Purchased SandRidge Energy (SD): 

  • Produce oil & gas, primarily in Oklahoma
  • Evaluating Midstates Petroleum when Midstates made an all stock offer for SandRidge Energy
  • SandRidge terminated CEO after Midstates offer
  • Notorious activist investor, Carl Icahn, owns meaningful SandRidge position and vocally unhappy with SandRidge
  • SandRidge and Midstates both trading at less than 4x cash flow
  • After evaluation concluded SandRidge will likely be sold and Midstates is most synergistic buyer
  • Therefore, purchased SandRidge to effectively buy Midstates at what will likely be a discount, if Midstates is the ultimate acquirer
  • If Midstates isn’t ultimate buyer, likely benefit from another firm paying much higher price

Added to Apogee Enterprises (APOG): 

  • Leading commercial glass coater and framing systems manufacturer
  • Investors impatient with financial challenges at recent acquisitions
  • Betting management will be able to turn strategic acquisitions to financial accretion and growth
  • Expect service backlog will lead to installation business rebounding
  • Margins forecasted to expand over time
  • Expansion into mid-height buildings should significantly increase available market
  • Geographic expansion could provide a multi-year runway for growth
  • Trading at less than 13x coming year’s expected earnings
  • Completed second round buy to reach normal weighting

Added to Atlas Financial (AFH): 

  • Specialty commercial vehicle insurer
  • Announced large reserve increase required
  • Stock price plummeted
  • Strong belief in management team
  • Trading at less than 6x management’s guidance for 2018 earnings
  • Raised weighting to one of top 10 positions in portfolio post drop 

Added to Steelcase, Inc. (SCS): 

  • Leading office furniture designer and manufacturer
  • Share price rose after initial purchase
  • Then drifted with market gyrations
  • Used lower price to finish purchasing a full weighting

Added to Super Micro Computer (SMCI): 

  • Developer of computer server technology and applications
  • Revenues exceeding expectations
  • Yet, earnings under pressure due to increasing memory prices
  • Consequently, stock price under pressure and trading near 11x this year’s earning’s estimates
  • Believe margin squeeze is temporary
  • Plus, industry at beginning of upgrade cycle
  • Increased holding to above average weighting

Added to ZAGG, Inc. (ZAGG): 

  • Design and market mobile device accessories
  • Trimmed company last year after stock price ran up
  • Stock price fell this year
  • Used weakness to rebuild position
  • Stock price fell further and now trading less than 10x this year’s earning’s estimates

Sold Liberty Tax (TAX): 

  • Nationwide franchisor and operator of tax preparation offices
  • Not comfortable with founder reshuffling board of directors
  • Several long-standing board members quite board in protest
  • As a result, accounting audit firm resigned
  • New board of directors fired CEO who was brought in to succeed founder
  • Although shares appear inexpensive, no confidence in direction of leadership
  • Therefore, shares sold

Sold Navigant Consulting (NCI): 

  • Leading consulting firm
  • Share price rallied since added to holding last fall
  • Fourth quarter earning did not rebound as anticipated
  • Relaxed Federal regulatory environment reducing demand for Navigant’s services
  • Yet, share price held up – likely due to an activist investor saber rattling
  • Sold company with belief business fundamentals do not support share price
  • Like management and happy to own company in future with lower price and improved fundamentals 

Sold Vonage (VG): 

  • Provider of voice over IP services, also known as VOIP, to business and residential clients
  • Management masterfully executing plan to improve business mix and growth rate
  • Stock price rallied strongly following benefits from strategic, revolutionary acquisition
  • Valuation reflecting lots of good news and future growth
  • Therefore, shares sold to use cash for less expensive alternatives

Trimmed Regional Management (RM): 

  • Installment loan lender to underbanked consumers
  • Management doing good job building foundation for future growth
  • Investors recognizing quality execution
  • Significant beneficiary of corporate tax rate reduction
  • Share price up more than 50% over last 12 months
  • Grew to one of largest weightings in portfolio
  • Used large weighting to generate needed cash for purchases above
  • Still, one of top five weightings in portfolio

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September 30, 2016 By admin

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Tieton Q3 2016 Overview

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Q2 2016 Russell Index Performance

June 30, 2016 By admin

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Tieton Q2 2016 Overview

June 30, 2016 By admin

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